A 0.5% or 0.25% rate cut is enough to make businesses think the U.S. outlook is good for investment?
I don’t even know if a rate cut could make Trump shut up—or just lie down in a coffin.
I_Enjoy_Beer on
Kinda makes sense to me. I think the Fed has signaled earlier this year that soft employment is the priority over gently-creeping-up inflation.
As for the markets, they’ve been detached from reality for some time now IMO, so I don’t think they are a terribly useful gauge of the economic health of the country.
Charizard3535 on
Makes perfect sense to me. Dow is valued in USD, the value of USD is going down and will likely continue to go down with money printing and rate cuts.
ComposedStudent on
Stock Market and the Economy are not the same thing. They can diverge since they measure different things. Stock market is forward looking while economic data is measuring the past.
Also the stock market is currently being supported by a few companies in a concentrated industry. AI companies are doing really good at the moment, they are doing so well, that they boost the S&P500 up, even when other industries are struggling.
curllyHoward on
It does make sense. Less employees, utilizing AI (or the threat of AI) equates higher profits, higher dividends, which are cap gains taxed. The Street also understands that the tariffs are a form of regressive taxation, thereby shifting the burden of funding government and its services to those less fortunate. From their prospective what’s not to like?
iridium65197 on
The fake debt-fueled economy is absolutely chomping at the bit for 2% loans that will undoubtedly fuel fart app startups, fin tech fast food microloan scams, the “gig economy,” and trillion dollar chat bots.
50centourist on
Trump will strip away workplace and employee protections and create tax breaks for corporations so that profits stay higher. Employees will be made to work longer hours with small pay and very little benefits.
This is the model Trump is trying to start in the US. Before that can happen, it will be necessary to reduce the job market and drive up debt so much that people will be have no choice but to accept this.
Thinklikeachef on
There was a recent study showing that corp profits are still rising due to layoffs and other cost cutting. People are also being forced to work longer hours. But this can only go on for so long.
VeterinarianFun2455 on
Rate cuts increase the supply of money in the system and creates a risk on regime. People tend to buy cheaper currencies, then buy higher yielding investments with the cheap currency. This also has the effect of lowering the government’s interest payments because they can refinance at a lower cost.
The downside is that it creates inflation by making more money available throughout the system. It’s not that they print more money is that more money flows.
EventHorizonbyGA on
Have share repurchases stopped? When interest rates fall borrowing gets cheaper. As long as companies are buying back their own shares they market will go up.
Silouettes on
The Buffet indicator is over 200% – equities are grossly overvalued unless you buy the AI narrative in terms of massive productivity gains.
Whats the line …. ” the markets can stay irrational longer than you can stay solvent “
reedthemanuel on
Investors are 10 steps ahead of the general public. Maybe they are pricing in expected gains from automation/ai + the coming death of SB’s. We are on the cusp of the annihilation of small business in america and possibly the greatest expansion of monopolistic power we have ever seen.
U.S. small businesses powered 50% of the economy, and with that portion now struggling under the weight of Trump’s policies, it’s left to be claimed by publicly funded companies (you know, like the ones on the S&P). This probably looks like a high-growth era for s&p investors, whereas for everyone else it looks like death.
aaronplaysAC11 on
Oh great a whole quarter of a percent, I’ve had people telling me “they’ll iron out the interest rate here soon” for 2 years now… beliefs over data I guess…
gipester on
The stock market is not an indicator of economic health, it’s a graph of rich people’s feelings. They feel good, apparently. The rest of us don’t matter.
14 Comments
A 0.5% or 0.25% rate cut is enough to make businesses think the U.S. outlook is good for investment?
I don’t even know if a rate cut could make Trump shut up—or just lie down in a coffin.
Kinda makes sense to me. I think the Fed has signaled earlier this year that soft employment is the priority over gently-creeping-up inflation.
As for the markets, they’ve been detached from reality for some time now IMO, so I don’t think they are a terribly useful gauge of the economic health of the country.
Makes perfect sense to me. Dow is valued in USD, the value of USD is going down and will likely continue to go down with money printing and rate cuts.
Stock Market and the Economy are not the same thing. They can diverge since they measure different things. Stock market is forward looking while economic data is measuring the past.
Also the stock market is currently being supported by a few companies in a concentrated industry. AI companies are doing really good at the moment, they are doing so well, that they boost the S&P500 up, even when other industries are struggling.
It does make sense. Less employees, utilizing AI (or the threat of AI) equates higher profits, higher dividends, which are cap gains taxed. The Street also understands that the tariffs are a form of regressive taxation, thereby shifting the burden of funding government and its services to those less fortunate. From their prospective what’s not to like?
The fake debt-fueled economy is absolutely chomping at the bit for 2% loans that will undoubtedly fuel fart app startups, fin tech fast food microloan scams, the “gig economy,” and trillion dollar chat bots.
Trump will strip away workplace and employee protections and create tax breaks for corporations so that profits stay higher. Employees will be made to work longer hours with small pay and very little benefits.
This is the model Trump is trying to start in the US. Before that can happen, it will be necessary to reduce the job market and drive up debt so much that people will be have no choice but to accept this.
There was a recent study showing that corp profits are still rising due to layoffs and other cost cutting. People are also being forced to work longer hours. But this can only go on for so long.
Rate cuts increase the supply of money in the system and creates a risk on regime. People tend to buy cheaper currencies, then buy higher yielding investments with the cheap currency. This also has the effect of lowering the government’s interest payments because they can refinance at a lower cost.
The downside is that it creates inflation by making more money available throughout the system. It’s not that they print more money is that more money flows.
Have share repurchases stopped? When interest rates fall borrowing gets cheaper. As long as companies are buying back their own shares they market will go up.
The Buffet indicator is over 200% – equities are grossly overvalued unless you buy the AI narrative in terms of massive productivity gains.
Whats the line …. ” the markets can stay irrational longer than you can stay solvent “
Investors are 10 steps ahead of the general public. Maybe they are pricing in expected gains from automation/ai + the coming death of SB’s. We are on the cusp of the annihilation of small business in america and possibly the greatest expansion of monopolistic power we have ever seen.
U.S. small businesses powered 50% of the economy, and with that portion now struggling under the weight of Trump’s policies, it’s left to be claimed by publicly funded companies (you know, like the ones on the S&P). This probably looks like a high-growth era for s&p investors, whereas for everyone else it looks like death.
Oh great a whole quarter of a percent, I’ve had people telling me “they’ll iron out the interest rate here soon” for 2 years now… beliefs over data I guess…
The stock market is not an indicator of economic health, it’s a graph of rich people’s feelings. They feel good, apparently. The rest of us don’t matter.