In just one month, the stance of the Federal Reserve (FED) has changed rapidly. Initially, FED Chairman Jerome Powell stated, “it’s still too early to definitively conclude that monetary policy has tightened enough,” at Spelman College in early December. However, just 12 days later, at the subsequent FOMC (Federal Open Market Committee) meeting, FED officials suggested the possibility of three interest rate cuts in 2024.
However, history has shown that the market’s reaction to FED’s large interest rate cuts is often not positive. Specifically, after each significant interest rate cut, the market has experienced negative fluctuations. Examples include the burst of the dot-com bubble in 2000 following continuous rate cuts by the FED and the financial crisis of 2007-2008 after a large interest rate cut.
Despite each interest rate cut being accompanied by various unique factors, this historical data provides valuable lessons for comparison with the situation in 2024, when many investors are predicting multiple significant interest rate cuts, similar to the past. This could apply to Bitcoin and other assets within the broader stock market trend.