A friendly reminder: if you’re rooting for rate cuts, you’re also betting there won’t be a recession in the next 12 months.
Why does that matter? Because the path of outcomes is very different depending on what follows a rate cut.
🔹 Since 1974, the Fed has cut rates without a recession 5 times.
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In every case, the S&P 500 was higher one year later.
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The average return: +17.8%.
🔹 But when a recession followed within a year (4 instances):
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Only once was the market higher a year later.
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The average return: –10.6%.
Today we’re facing labor market weakness, sticky inflation, tariff uncertainty, and softness in housing. The big question:
Is this a recipe for a near-term recession, or just another “wall of worry” for the market to climb?
For equity bulls, your optimism hinges on the latter.
