Are rate cuts a bullish or rather a bearish event?


Throughout history, we have seen how when interest rates have been paused, the markets have entered a distribution phase or the final phase of the bullish rally. Once the Fed start cutting interest rates, the market often drops. But why?

High interest rates for an extended period are bad for the economy. Central banks intentionally maintain high interest rates in a phase known as QT (Quantitative Tightening), as a measure to slow down economic activity and control inflation. They achieve their goal, as inflation drops, but it has serious collateral effects, such as a possible recession. Some countries like the UK and Japan have already announced they are in recession. It's likely that other countries will also confirm this, and the markets return to their fair price.