Falling Interest Rates: Why a Profitable Stock Boom Is Coming

The US Federal Reserve will hold its next meeting in less than a week. And given the state of our nation’s economy, we’re extremely confident that means there will be interest rate cuts in just a few days.

Coincidentally, that also means a major rally on Wall Street is likely about to unfold.

Of course, depending on the underlying dynamics at play, rate cuts can be good or bad.

When the Fed proactively cuts interest rates while the economy is still healthy (positive GDP, low unemployment, etc.), rate cuts are “good.” These cuts breathe life into a sluggish economy and tend to rejuvenate economic activity over the next few months. Stocks usually go up when we get good rate cuts.

Bad interest rate cuts, on the other hand, occur when the Fed reactively cuts interest rates in response to an already troubled economy (weak GDP, high unemployment, etc.). These cuts are failing to revive a dying economy that continues to weaken. And stocks suffer as a result.

Since 1990, we have experienced six rate cut cycles. Three of these cycles were “good”; and three were “bad”.

Right now, I want to review one of the good ones – and why it looks so similar to our current economic setup.

Interest rate cuts in 1995: Looking back to see what’s next

In July 1995, the Federal Reserve began a proactive rate-cutting cycle.

At the time, the economy was still generally healthy. GDP measured about 3.5%. Jobless claims were around 350,000. We had good economic growth and relatively low unemployment.

We have a similar setup today. Right now, GDP is around 3%. Jobless claims are around 230,000. Indeed, as was the case in the summer of 1995, we still have good economic growth and relatively low unemployment. Those rate cuts in 1995 sparked a huge stock market rally. In the two years following the first rate cut in July 1995, S&P 500 increased by 66%, while Nasdaq increased by 54%.

The “good” rate-cutting cycle of 1995 helped trigger a huge, multi-year stock market rally.

We believe that an equally “good” cycle of rate cuts will begin in just a few days. When it does, it will likely help spark a comparable stock market rally.

And we think it has the potential to last until 2025 – even 2026.

The Final Word

Over the past two months, the stock has been stuck in neutral without much upward momentum.

But with the Fed’s first official tapering in less than a week, we suspect you’ll soon see a mad dash to the markets as traders rush to pile back into stocks.

Therefore, we believe that now is an excellent time to prepare for this big market rally.

And of course, as is true of most market rallies, some stocks will rise much higher than others.

That’s why we just organized an urgent strategy session to help people prepare for this major profit potential.

But if you missed this session, you still have time catch the replay.

Don’t run away from the current market volatility as September is usually a bad month for stocks.

Rather, embrace it. Watch the replay of our special briefing. And learn how you can turn that volatility into profits.

Learn how to best prepare for a market crash.

_{As of the date of publication, Luke Lango did not hold (either directly or indirectly) any position in the securities mentioned in this article.}

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