The TRUTH On How Rate Cuts Will Impact The Stock Market in 2024
Published: 2024-09-21
Status:
Available
|
Analyzed
Published: 2024-09-21
Status:
Available
|
Analyzed
Predictions from this Video
Incorrect: 0
Prediction
Topic
Status
The S&P 500 rose by 16% in 2020 following a 1.5% Fed rate cut.
"In 2020 when the pandemic hit, the Federal Reserve Bank cut interest rates by one and a half% and the stock market in 2020 rose by 16%."
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The S&P 500 rose by over 28% in 2019, a year when the Fed cut interest rates by 0.75% due to recession fears.
"In 2019, the Federal Reserve Bank was also cutting interest rates. They cut interest rates by 0.75% because they were worried about a potential recession. And in 2019, the stock market rose by over 28%."
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Historically, a 1.5% Fed rate cut in 2020 was followed by a 16% rise in the stock market.
"In 2020 when the pandemic hit, the Federal Reserve Bank cut interest rates by one and a half% and the stock market in 2020 rose by 16%."
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A 0.75% Fed rate cut in 2019, due to recession fears, was accompanied by a 28% stock market increase.
"In 2019, the Federal Reserve Bank was also cutting interest rates. They cut interest rates by 0.75% because they were worried about a potential recession. And in 2019, the stock market rose by over 28%."
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A 4.25% Fed rate cut in 2008, aimed at combating recession, preceded a 38% stock market decline.
"In 2008, the Federal Reserve Bank cut interest rates by 4.25% to fight off the recession. And in 2008, the stock market fell by over 38%."
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A 1% Fed rate cut in 2007, intended to prevent a recession, was followed by a 3.5% stock market increase.
"In 2007, the Federal Reserve Bank cut interest rates by 1%. In a proactive measure to prevent a potential recession because we were starting to see the economic worries happen. And in 2007, the stock market rose by three and a half%."
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A 0.75% Fed rate cut in 2003 corresponded with a 26% stock market gain.
"In 2003, the Federal Reserve Bank cut interest rates by 0.75% and the stock market rose by 26%."
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Following the dotcom bubble burst, a 4.75% Fed rate cut in 2001 was associated with a 9% stock market decrease.
"And in 2001, the Federal Reserve Bank cut interest rates by 4.75%. This is after the dotcom bubble burst and the stock market fell by just over 9%."
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The US federal deficit in 2024 was projected to be $1.9 trillion.
"In 2024, the United States federal deficit is expected to be $1.9 trillion."
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The US national debt is approximately $35 trillion.
"we have about $35 trillion worth of national debt."
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The Federal Reserve Bank creates money to lend to the US government to cover spending deficits, such as the $1.9 trillion deficit.
"when the government wants to spend $1.9 trillion that they don't have, a big chunk of this comes from none other than the Federal Reserve Bank. And because the Federal Reserve Bank doesn't have money, they have to then print these trillions of dollars out of thin air. So, when the government wants to spend $1.9 trillion that they don't have, a big chunk of this comes from none other than the Federal Reserve Bank. And because the Federal Reserve Bank doesn't have money, they have to then print these trillions of dollars out of thin air. And then they lend this money to the United States government."
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Lower interest rates can lead to increased government borrowing from the Federal Reserve, resulting in more money creation and higher inflation.
"lower interest rates mean the government can borrow more dollars from the Federal Reserve Bank, which means the Federal Reserve Bank can then create more dollars, which means you have more inflation in that way."
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The US national debt will become a problem if the government can no longer afford to pay its interest, necessitating borrowing to cover those payments.
"it will become an issue if we borrow more money and we can no longer service our debt. if we can no longer pay back our interest payments because then we'll have to borrow money to pay back our interest"
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Despite market volatility over the past century, the stock market has historically averaged a 10% annual return.
"over the last century, we have seen recessions. We have seen market crashes. We have seen market booms and we have seen sideways markets as well. Yet, despite that, the markets have gone up by an average of 10% a year."
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Upcoming events in the next few months, including overseas wars, the US election, and interest rate cuts, are expected to create market volatility and emotional trading.
"There's going to be a lot of day-to-day things happening, especially over the next few months. We have wars happening overseas. We have an election happening in the United We have an election happening in the United States and then on top of that we have interest rates being cut and so there's going to be a lot of emotions"
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