I can’t figure out why a 0.25% or 0.5% rate cut would be enough for companies to believe that America’s future looks bright enough to invest and plan ahead with certainty.
Up to now, Trump has kept using all kinds of tactics that make people less and less confident about investing.
Just look at the recent news he easily destroyed South Korea’s willingness to invest.
So what about next time?
A 0.25% or 0.5% rate cut is no match for just holding on to cash to guard against Trump wrecking things himself.
What happens if employment doesn’t improve at all after the rate cuts?
byu/AppropriateRefuse590 ininvesting
Posted by AppropriateRefuse590
40 Comments
Golly we about to find out!
Likely another rate cut
You don’t want to be holding cash when the money printer is running.
Stagflation?!?
Quantitative easing
Stagflation.
Probably won’t put much of a dent into the “trump economy wrecking ball”
it wont. and inflation will continue. its a stagflation decade. stock market is wrong and will eventually correct its mistake. the longer its wrong the worse the correction. right now its about a 60% correction needed for the spx500
More rate cuts & against all sense & sensibility, the markets will rally!
He did predict the greatest and biggest depression we have ever seen if Kamala won so i guess he was right. We are just waiting for the black swan that’s coming soon.
Then what I expect to happen happens
The fed makes their statements every month, it’s the same opening statement every time. JPow is questioned all the time and he reminds everyone he has a few tools.
Goals = Maximum employment and price stability, i.e. the “dual mandate.”
Tools available = adjust interest rates up or down via fed funds rate. (edited – to exclude comment about QE/QT)
Jerome has also mentioned several times they are well positioned to take action if and when it’s necessary (i.e. “we can cut multiple times to control effects as needed).
I’m inclined to agree with you, cutting rates by .25-.5% I think will have no meaningful impact to drive economic growth. Worse yet it will help drive inflation somewhat as money flows out of bonds and into assets.
Basically, I think they will do nothing but talk, flail around like fish out of water looking for a solution to a problem they can’t really solve, in desperation transfer more wealth to the rich through various means in the hopes they will stimulate the economy, then in a few years when the economy rebalances on its own they will pay themselves in the back for how they saved the economy. Meanwhile we will be worse off permanently impaired from the damage that was done.
Employment will only go down as Trump fires Federal employees and cuts grants.
Real rates are coming down and so will fed rate gradually (.25 x 3 for 2025) and likely stay there for 2026
We remain in a higher inflation period for the decade with technical low rates due to elevated inflation (ie 2.5-3% inflation, 4-4.5% interest, 1.5-2% real interest rate(
Trump has executed a very bold and interesting plan in a chaotic and mischievous manor – tariffs, reshoring stablecoins/dollarize ex-US/ restore euro dollars
You can hold some cash but understand that assets are going to inflate and absorb the inflation , you have to be exposed to hard assets in this regime
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If you want the playbook, rate cuts are only going to fuel inflation and the interest rates will be added right back on again. Unemployment will stay the same. Lots of people struggled with work in the early-mid 80s and had to deal with part-time work. It’s going to be a tough road ahead, but we’ll eventually find our way.
they’ll cut more
Who cares? We keep making money. Stock market is 50% gains last 30 months.
Fannie Mae and Freddie Mac about to make everyone rich. Just sit back and watch it
Rate cut not gonna do much, once we get clarity on tariffs maybe
Employment is fine.
You can’t time the market.
Just keep buying and relax.
Rate cuts have a two fold effect. First yield on bonds will fall pushing investors into riskier assets like stocks. Secondly the cost of borrowing will fall making it easier to finance new business. Eventually this will lead to more jobs.
So I guess you are asking what happens if it takes longer than expected for the feds monetary policy to have the desired effect? Well the labor market will be bad for a bit. That’s really all there is to it.
It won’t. Employment is a lagging indicator.
Don’t rate cuts take like 6 months to work their way through the system?
Dumb money thinks like this. Watch the markets. They’re roaring. The media creates fear and then folks get nervous and don’t invest or pull their money while smart money is piling in. Finally you can’t take any more FOMO, so you shove at the top. Smart money sees this and bails, the market drops, you get nervous and pull out and rinse and repeat.
We are in a bit of a strange time with not really being able to project historical outcomes based on rate cuts. Between AI and uncertainty with tariffs and other “political” outcomes. While we are mathematically 50 years away from the 70s, it may as well be 200 years (the economy is so different).
The rate cuts are supposed to spur business investment – resulting in more hiring and lowering unemployment. The hope is that inflation doesn’t get too hot.
As others have said – the Fed is supposed to be concerned about prices and employment, they are more concerned with employment.
Trump’s only style is to create chaos and uncertainty, then make a deal and claim the victor, despite reality and the repercussions. Markets don’t like chaos, uncertainty, and repercussions, especially when hiring or building new facilities.
So “What about next time?” Expect it to get worse, especially after the Hyundai fiasco in Georgia. Nothing says “I want foreign governments to invest in US manufacturing **but I have absolutely no idea what I am doing because I created a system that raided and arrested/detained hundreds of people working here legally** than what happened with South Korea and Hyundai. Not to mention that the South Korean workers were highly skilled engineers who were only temporarily here building the plant that would provide 8,500 jobs to American workers
it wont. all it will fuel are AI, increased automation and buyback, oh so many buybacks.
The average recession is 17 months from peak to trough back to peak. After one bad year, you start to lap that bad year and return to growth. Then the optimism starts again.
It’ll be Bidens fault
Yall better be converting every single piece of paper you get into gold or at the very least silver. Stagflation is diff and we not ready .
LoL. Trump is the king👑 of all time highs in the stock market. That’s all he cares about. The rates could go up 75,000bps and if Trump is president, the Dow will go to 1,000,000
I have recently put about $500k (10 pct of total assets for life) into cash. It isn’t if. it’s when
companies dont…..they are still recoiling and recouping from COVID. Their employees may have gotten the jab…..the companies closed doors, at least the non-online variants…..online companies did not skip a heart-bear.
what companies are dealing with is WFH and RTW employment drama
Long end goes lower
Interest rate cuts will not improve jobs when the primary goal now is offshoring. Why would they want to pay more for local US labor just because interest rates got lower.
What it will do is boost more job destroying misallocation of capital into acquisitions and share buybacks which will result in more layoffs.
This cut is not going to. You would need several rate cuts before you see an effect.
lol S Korea thought they could make a deal to invest and then build the job with imported labor to undercut American wages and change the deal. They f’ed around and found out. What’s the issue?
Also, those positions replaced by AI and fired government positions are not sensitive to lowered rate
We start destroying AI and Robots.
Ai is starting the takeover. Rates will have to go negative