The Federal Reserve's intention to cut rates is to stimulate the economy by lowering borrowing costs, which generally has a positive expectation for the stock market and risk assets. However, the reasons why the market may still decline after a rate cut announcement can include the following:
A rate cut is seen as a 'firefighting' signal.
When the market has already anticipated an economic slowdown or recession, a rate cut is often interpreted as the central bank's concern about the economic outlook. Investors may view a rate cut as a 'passive' measure rather than 'active' stimulus, leading to a shift in sentiment towards pessimism.
Inflation remains high.
If interest rates are cut while inflation remains high, real interest rates (nominal rates - inflation rate) may still be negative, leading to a decline in actual purchasing power. Investors worry that even with lower interest rates, inflation will continue to erode returns, thereby suppressing stock market performance.
Policy uncertainty or subsequent tightening expectations
After the rate cut, the market may begin to speculate whether the Federal Reserve will raise rates again in the short term or take other tightening measures (such as balance sheet reduction). This uncertainty may lead to a risk of capital outflows from risk assets.
Flattening or inversion of the yield curve
Rate cuts often cause short-term rates to decline more quickly, leading to a flatter or even inverted yield curve. An inverted yield curve is seen as a precursor to economic recession, prompting investors to preemptively avoid risk.
Global factors overlap
During the same period, other major economies (such as the Eurozone, the UK, or Japan) may experience negative news, or geopolitical tensions and energy price fluctuations may arise, all of which could offset the positive effects of the Federal Reserve's rate cut.
Technical and sentiment aspects
The market may have already formed a strong upward trend before the rate cut announcement, and technical indicators (such as the relative strength index and moving averages) may show overbought signals. Once the rate cut news breaks, some investors may choose to take profits, leading to short-term selling pressure.
Summary: A rate cut itself is an easing policy, but if interpreted as a sign of worsening economic prospects, high inflation, or accompanied by other negative factors, market sentiment may still turn pessimistic, leading to a decline after the rate cut. Investors typically focus on the following key points when facing such macro events:
Whether inflation data (CPI, PPI) remains high, the Federal Reserve's subsequent guidance (whether it hints at future rate hikes or balance sheet reduction), the shape of the yield curve (whether inversion occurs), and the global macro environment (other central bank policies, geopolitical factors)
By synthesizing this information, one can better assess the true direction of the market after a rate cut.$ETH #美联储FOMC会议
