Abstract
After a long pause since the final rate hike this cycle in July 2023, the Federal Reserve initiated its easing cycle with a first-rate cut in September 2024. The only other time in recent history with the Fed leaving rates at the top for an extended period of time was the 15 months spanning June 2006 to September 2007, with the consequences all investors remember. Historically, central banks ease interest rate policies as the economy slows in order to stimulate demand and avoid a recession. When recession is avoided following an easing cycle, economists term this outcome a “soft landing”. While lower rates are stimulative for stocks, rate-cut cycles can be perilous for equity investors if aggregate demand continues to slow and the economy tips into recession. This article studies the past Fed rate-cutting cycles and looks for parallels that could offer insights for tactical equity investors.