Thanks Matt, very useful information! question - given all the data you shared above, historically how does the rate cuts effecting the market /QQQ this month
First, when we had the selloff in July - which broke this long streak of gains for the QQQ in the month - I felt that was something I expected to see more in September. That it was more of an emotional freakout than a true data freakout. You had the Trump assassination attempt, which gave him a bump in the polls, that lead to his comments on a possible invasion of Taiwan having more weight, and then the focus turned to the jobs data... that bad news is bad news.
It felt very much to me an election year reaction.
The tone has shifted some since.
But let's deal with the data first before I share more of my feelings...
Our September rate cut would come on September 18.
Going back through the last rate cut cycles, we can look at how the QQQ performed the month of the first cut...
In August 2019, the Fed lowered rates 25 bps... the QQQ ended the month down 2.07%.
In September 2007 (the 18th actually), the Fed lowered rates 50 bps... the QQQ ended the month up 5.07%.
And in January 2001, the Fed cut rates 50 bps... the QQQ ended the month up 9.8%.
If we go back to September 1998 (the QQQ didn't exist), the Fed cut rates 25 bps... the Nasdaq rocketed 12.25% higher.
And in July 1995, the Fed lowered rates 25 bps... the Nasdaq surged 7.2%.
So, from a historical trend standpoint, the first month of a rate cut rewards tech! That's four monthly gains out of five first rate cuts. And if all we had to contend with in September, I'd lean more on this trend than any other.
My caveat this year is that its an election year. September tends to be a difficult month for tech (particularly the last 10 to 15 days of the month).
Our first presidential debate is scheduled for September 10.
And then the next one in October... which is another terrible month for stocks in election years.
Can a Fed rate cut overpower the typical political unease this year? I'd definitely welcome it. But I'm also more likely to err on the side of caution for now. I'd be looking to take out some protection at tops and then buying heavily in the days before the election.
Of course, after the election is over, the market tends to be off to the races regardless. There's that sigh of relief that breathes life back into shares.
Thanks Matt, very useful information! question - given all the data you shared above, historically how does the rate cuts effecting the market /QQQ this month
Thanks Yosef!
That's a good question.
First, when we had the selloff in July - which broke this long streak of gains for the QQQ in the month - I felt that was something I expected to see more in September. That it was more of an emotional freakout than a true data freakout. You had the Trump assassination attempt, which gave him a bump in the polls, that lead to his comments on a possible invasion of Taiwan having more weight, and then the focus turned to the jobs data... that bad news is bad news.
It felt very much to me an election year reaction.
The tone has shifted some since.
But let's deal with the data first before I share more of my feelings...
Our September rate cut would come on September 18.
Going back through the last rate cut cycles, we can look at how the QQQ performed the month of the first cut...
In August 2019, the Fed lowered rates 25 bps... the QQQ ended the month down 2.07%.
In September 2007 (the 18th actually), the Fed lowered rates 50 bps... the QQQ ended the month up 5.07%.
And in January 2001, the Fed cut rates 50 bps... the QQQ ended the month up 9.8%.
If we go back to September 1998 (the QQQ didn't exist), the Fed cut rates 25 bps... the Nasdaq rocketed 12.25% higher.
And in July 1995, the Fed lowered rates 25 bps... the Nasdaq surged 7.2%.
So, from a historical trend standpoint, the first month of a rate cut rewards tech! That's four monthly gains out of five first rate cuts. And if all we had to contend with in September, I'd lean more on this trend than any other.
My caveat this year is that its an election year. September tends to be a difficult month for tech (particularly the last 10 to 15 days of the month).
Our first presidential debate is scheduled for September 10.
And then the next one in October... which is another terrible month for stocks in election years.
Can a Fed rate cut overpower the typical political unease this year? I'd definitely welcome it. But I'm also more likely to err on the side of caution for now. I'd be looking to take out some protection at tops and then buying heavily in the days before the election.
Of course, after the election is over, the market tends to be off to the races regardless. There's that sigh of relief that breathes life back into shares.