An interesting Kiplinger chart on stocks after Fed rate cuts
Posted By RichC on January 18, 2025
While reading a recent issue of Kiplinger as an investor, an article has me contemplating the history of the year following Federal Reserve rate cuts.
It seems likely, that unless there is a crisis in 2025, that financial markets will see gains again. Of course the market watcher in me realizes that the stock market moves up more than it moves down and that being invested is generally better than sitting on the sidelines. That said, I do tend to be a contrarian and cynic when it comes to being overly optimistic. So …
Should we be concerned that valuations for companies are too high?
Yes … because 2024 did see some Greenspan-like irrational exuberance around the election of business friendly politicians, innovation at tech companies and rapid advancements in artificial intelligence; it does seem to be pushing some valuations into nosebleed levels. Also, in the back of my mind, heavy government spending after Covid, 3 years of high inflation and our growing national debt my be impacting just how much one US dollar is worth (costs and prices are high).
Nevertheless, Fed rate cuts do show correlation with a stock market gain the year following them so as long as we avoid a recession.
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