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Re: Why stocks went down when Fed cut interest rates
Dottie57 wrote: ↑Wed Sep 18, 2024 9:44 pmavalpert1 wrote: ↑Wed Sep 18, 2024 9:27 pmDottie57 wrote: ↑Wed Sep 18, 2024 8:59 pmParkinglotracer wrote: ↑Wed Sep 18, 2024 3:29 pm
Like billfromct mentioned – Purchase on the rumor, promote on the information is the normal market timer’s mantraSo Possibly we’re seeing an unwinding of merchants positions main into the fed reserve price lower. As soon as the speed cuts occurs merchants are onto to the subsequent market play.
Markets are all about expectations and the expectation was over days / weeks/ months ? In the past perhaps.
I don’t market time so my major ideas are “not my monkey, not my circus” as I watch all of it.
When did the announcement come throughout the day? I did learn most of inventory market was down at present earlier than announcement.
As for bonds happening…. We’ll see what occur within the subsequent week. I do know there was an thought floated for fed dropping charges 3/4 level. So 1/2 level could be a disappointment.
The announcement was at 2 and the market was up heading into and following the announcement. There was no notion that they had been going to drop it 75bp by anybody being severe, actually 0% forecasting that in futures markets – so no, 50bp was the largest drop anticipated and by this morning was thought-about extra probably than not.
So the large takeaway is that the sources you’re studying aren’t doing a superb job of informing.
My supply was both CNN. or WaPo earlier on Wed. What I take away is that markets purchase into rumors. Rumors develop into certainty. Outcomes are good, however don’t meet the rumor inflated expectations.
Again in 2010 I purchased Apple shares. I noticed the rumors inflate expectations, the inventory value would rise. Then outcomes could be wonderful, however didn’t meet the loopy, silly expectations and the inventory value fell.
The inventory market appears to be very emotional. A head case.
I am curious how precisely you’ll be capable of differentiate the market being ’emotional’ in that circumstance versus rationally making use of chances to the longer term and adjusting as these chances transfer to 0 and 1 with certainty.
Re: Why stocks went down when Fed cut interest rates
All wonderful solutions and ideas, group.
One factor although. Based mostly on the feedback concerning the bonds I nonetheless don’t get bond funds proper. I believed that after a lower cash are cheaper for banks/debtors and thus newly issued bonds and treasuries could have decrease curiosity/coupons. So, I believed as soon as the brand new bonds/treasuries steadily change outdated bonds/treasuries in bond funds/ETFs the general fund’s yield will go down. However seems to be like it’s extra difficult, from feedback it seems that brief time period bond yields go down, long run bond yields for some cause go up. It’s past a mean mind capability, lol.
Will keep the course
Re: Why stocks went down when Fed cut interest rates
madmax71 wrote: ↑Wed Sep 18, 2024 9:53 pm
All wonderful solutions and ideas, group.
One factor although. Based mostly on the feedback concerning the bonds I nonetheless don’t get bond funds proper. I believed that after a lower cash are cheaper for banks/debtors and thus newly issued bonds and treasuries could have decrease curiosity/coupons. So, I believed as soon as the brand new bonds/treasuries steadily change outdated bonds/treasuries in bond funds/ETFs the general fund’s yield will go down. However seems to be like it’s extra difficult, from feedback it seems that brief time period bond yields go down, long run bond yields for some cause go up. It’s past a mean mind capability, lol.
Will keep the course
So that is my understanding. What the Fed did at present was lower the federal funds price. That’s the in a single day price banks use when they should lend cash to one another. Now, the federal funds price has a robust affect on the value of Treasury bonds, but it surely doesn’t dictate these costs. Treasuries, like these in BND, have their costs decided by the market, both at public sale or in secondary buying and selling. For instance, should you wished to buy a bond on the secondary market, you would possibly think about the federal funds price however nonetheless negotiate with the vendor for a lower cost and better yield.
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Re: Why stocks went down when Fed cut interest rates
saveninvest wrote: ↑Wed Sep 18, 2024 3:18 pm
Attention-grabbing query and I haven’t got a solution. However the query is even tougher to reply for bonds. The entire bond fund ETF (BND) declined 0.3% at present whereas every thing I had learn (together with this discussion board) has asserted that BND value ought to enhance when the speed is lower. I neglect the precise method I learn however my understanding was that there’s a tight and basically predictable destructive relationship between BND value and rates of interest. That was definitely not borne out at present.Possibly extra educated of us can clarify. Shares I can nonetheless kind of perceive b/c they’re affected by many alternative issues, together with investor expectations. However why did BND decline?
The Fed controls in a single day charges between banks. The Fed doesn’t management the bond market and long term charges are provide demand. Don’t make it tougher than it’s.
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Re: Why stocks went down when Fed cut interest rates
Northern Flicker wrote: ↑Wed Sep 18, 2024 4:31 pm
This demonstrates that it’s unpredictable, regardless of the lengthy stream of threads that recommend the opposite.Shares and bonds are priced as a threat premium on prime of the risk-free price. Fed price modifications solely kind of instantly influence the risk-free price. My guess is {that a} decrease Fed price will increase inflation threat barely, so inflation threat premia had been resetting, however that guess isn’t any higher than anybody else’s conjecture.
There are solely a few thousand issues happening on the planet so it’s straightforward to determine.
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Re: Why stocks went down when Fed cut interest rates
windaar wrote: ↑Wed Sep 18, 2024 4:46 pmsaveninvest wrote: ↑Wed Sep 18, 2024 3:18 pmmy understanding was that there’s a tight and basically predictable destructive relationship between BND value and rates of interest. That was definitely not borne out at present.I puzzled about that too. After 2022 there have been so many posts right here explaining how bonds work however they’ve type of contradicted one another.
No. Bond costs are inversely correlated with charges.
The Fed lower brief charges for banks. Markets are managed by provide and demand.
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Re: Why stocks went down when Fed cut interest rates
S_Track wrote: ↑Thu Sep 19, 2024 2:17 ammadmax71 wrote: ↑Wed Sep 18, 2024 9:53 pm
All wonderful solutions and ideas, group.
One factor although. Based mostly on the feedback concerning the bonds I nonetheless don’t get bond funds proper. I believed that after a lower cash are cheaper for banks/debtors and thus newly issued bonds and treasuries could have decrease curiosity/coupons. So, I believed as soon as the brand new bonds/treasuries steadily change outdated bonds/treasuries in bond funds/ETFs the general fund’s yield will go down. However seems to be like it’s extra difficult, from feedback it seems that brief time period bond yields go down, long run bond yields for some cause go up. It’s past a mean mind capability, lol.
Will keep the courseSo that is my understanding. What the Fed did at present was lower the federal funds price. That’s the in a single day price banks use when they should lend cash to one another. Now, the federal funds price has a robust affect on the value of Treasury bonds, but it surely doesn’t dictate these costs. Treasuries, like these in BND, have their costs decided by the market, both at public sale or in secondary buying and selling. For instance, should you wished to buy a bond on the secondary market, you would possibly think about the federal funds price however nonetheless negotiate with the vendor for a lower cost and better yield.
That is right I feel apart from negotiating on a bond value. It must be a fairly illiquid bond I’d assume for you to have the ability to negotiate.
Re: Why stocks went down when Fed cut interest rates
madmax71 wrote: ↑Wed Sep 18, 2024 3:11 pm
So, the Fed decreased rates of interest by 0.5% to 4.75-5%.
Somebody not skilled would assume that this could result in a lower in cash market funds yields, treasury yields, and bond fund yields. So, investing in fixed-income property will present much less return and folks could also be extra inclined to purchase shares.
Nevertheless, all main equities (whole US market, S&P 500, Nasdaq 100, whole worldwide, US small-cap worth) went down after the assembly.
What’s the cause for this downward transfer whenever you would anticipate folks to purchase extra shares on this scenario? I’d love to listen to your ideas as the same scenario will probably occur once more someday. I perceive that it is just 2 hour (LOL) pattern and should utterly revert tomorrow and so forth however it’s nonetheless fascinating.
Cause? It’s all noise. Ignore it and all of the squiggles. Step again, take a look at the large image.
Aside from that, image being in command of mega cash. How would you place your self? Would you react immediately? I might say that the sensible cash takes their time, sifts by means of issues, perhaps already entrance ran the markets. Now, have to think about strikes and work them out. Maybe must have some committee conferences, take issues additional. So the blips up and down would possibly all be the brief time period merchants feeding off themselves and the bots. Or perhaps you might have only a household workplace with 10M. Did you get to that time being brash and reactive such that minutes after the choice you’re shifting cash round?
Not actionable…
Pale Blue Dot
Re: Why stocks went down when Fed cut interest rates
It is all about expectations. Typically you may see a agency announce incredible outcomes, however the inventory tanks as a result of it was lower than the analysts’ consensus. It is all fairly foolish.
Re: Why stocks went down when Fed cut interest rates
rockstar wrote: ↑Wed Sep 18, 2024 3:26 pm
He mentioned that if they might have acquired the final jobs report earlier than the July assembly, they might have lower in July. This implies that the Fed is reducing to maintain the labor market from getting cooler. And he mainly threw within the towel on shelter prices blaming provide.However should you take a look at the yield curve, it steepened. Larger charges on the lengthy are likely to affect equities greater than on the brief finish.
agree. my take is that the market is now apprehensive the fed is apprehensive about jobs. and therefore would possibly lower an excessive amount of stoking inflation. therefore lengthy charges went up and bonds went down. for shares yesterdays transfer was in all probability simply noise.
cheers,
grok
RIP Mr. Bogle.
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Re: Why stocks went down when Fed cut interest rates
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Re: Why stocks went down when Fed cut interest rates
My hunch is that inventory costs will transfer at present (sooner or later after the Fed announcement).
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Re: Why stocks went down when Fed cut interest rates
Alex Frakt wrote: ↑Wed Jun 15, 2022 7:02 pm
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