Federal Reserve Rate Cut: Economic Impacts and Investment Strategies

The Federal Reserve's rate cut signals potential growth for stocks and Bitcoin, benefiting investors despite economic uncertainties.

### Federal Reserve Cuts Interest Rates: Implications for the Economy and Investments
* 📉 The Federal Reserve's recent decision to **cut interest rates by half a percent** is expected to **significantly impact the economy, stock market, and individual finances**, despite the seemingly small percentage change.
* 🔍 Utilizing the CME Fed Watch tool, it was anticipated that this rate cut would occur, following a period where the Fed aggressively raised rates to **combat inflation**, which peaked at **9% in June 2022**.
* 📊 Historical data reveals that when the Fed lowers rates, the S&P 500 has posted **positive returns in 86% of cases** since 1929, although economic context, such as recessions, can alter outcomes.
* 📈 Currently, the likelihood of a recession in 2024 stands at **8%**, but predictions indicate a **56% chance** of one occurring before 2026, which could affect **stock market performance**.
* 💵 Lower rates generally enhance corporate profitability by **reducing borrowing costs**, benefiting sectors like utilities and real estate, which often carry **significant debt**.
* 💳 For borrowers, the news is positive as **lower interest rates will likely reduce costs** for loans, mortgages, and credit cards, making borrowing **more accessible**.
* 💰 However, savers may see a decline in interest rates on savings accounts, with historical trends suggesting a **drop of up to 0.5%** following a Fed cut, which could affect **high-yield savings**.
* 📈 Personally, I am diversifying my investments across **real estate, Bitcoin, stocks, and cash**, while continuing to **reinvest dividends** and monitor the market's response to these economic changes.

So, the economy just flipped because the Federal Reserve just announced that they're cutting interest rates by half a percent. And I know that sounds like a really small number, but this will have a huge impact on the economy, the stock market, and your money. And if you're wondering how I was able to release this video so soon, considering the news just dropped, it's not because I'm a genius; it's because I took a peek at the CME Fed Watch tool, which has been predicting this for a couple of weeks now. And based on this rate cut, I want to help break down exactly what this means for savers, investors, the stock market, Bitcoin, and of course, magicians. I'm going to show you some really cool data about what happened to everyone when we did this in the past. Now, the first question you might have is why did the Federal Reserve do this. So, let's rewind for the last 2 and 1/2 years. The Federal Reserve has been raising interest rates to fight inflation after the price increase which

went up to a 40-year high of 99.1% in June of 2022. That was all thanks to the money printer. Inflation at that level was comparable to the late 1970s and early 80s when the FED also raised their rates under their Papa Powell at the time who was chairman Paul Volcker back then. Paul Volcker raised their interest rates as high as 20% to slow inflation which caused a recession. But fast forward to today we don't have that same level of extreme inflation arguably. But the FED's rate hikes over the past 2 years have been the most aggressive since the 1970s Volcker era. And now the latest economic report shows inflation has gone down to 2.5%. Remember our goal is to get to 2%. We were at 9% at our peak now we're at 2.5%. And this cooling off inflation is one of the main reasons why the FED has decided it was safe to pivot and lower.

interest rates, specifically something called the federal funds rate, or the cost for banks to borrow money from each other, which directly affects our cost to borrow money as consumers. So, that's how we got here. But now, I want to share with you some really interesting data about what this means for the stock market, dividend stocks, Bitcoin, bonds, savers, and investors. And at the end of the video, I want to give you my personal opinion on how I'm investing. So, let's get into it. Hi, my name is Andre J. Hope you're doing well. Come for the finance and stay for the economy. So, first, let me start with the most exciting topic that everyone wants to know about, which is the stock market and what this means for investors. Now, in the past, when the FED lowered the interest rate, the stock market tended to do well. According to a study by Schwab, in the 12 months after a rate cut, the S&P 500, the stock market, has posted positive returns in 86% of cases since 1929. Data shows in the last 100 years.

that the FED pivoted to lower rates. It was a good thing for investors, not in all cases, but in 86% of cases. And the reason that it's not 100% is because if there is a recession, that changes things. If there's a recession, the stock market on average has lost 15% in the first 12 months. So, the follow-up question I had is, what are the odds of a recession? The good news is, in 2024, according to the stock market, it's only 8%. But the bad news is, it's predicting a 56% chance we could go into one before 2026. So, it's kind of a coin flip. But generally speaking, lower rates have helped boost stock prices because companies borrow money more cheaply, which helps them with their profits. But it's also important to remember that rate cuts are not a guarantee that the stock market will go up because timing and context matters too. For example, during the dot-com bust when the FED lowered rates, but the stock

market still went down 13% in the following 12 months. And again, when the FED started cutting rates in September 2007 in response to the financial crisis, the stock market also went down 17.6%. But for the most part, stocks do tend to go up when the FED lowers rates. And here's a few examples: when the FED cut rates in 2019, stocks went up over 15% in the months leading up to the blip that we all experienced around the world. And after the fed's emergency rate cut in 2020, the stock market went up by over 60%, and it reached an all-time high. Overall though, here's a little cheat sheet for you to reference in case you forget all of this nerdy information. This shows you data between 1976 to 2023 with International stocks, US Stocks, commodities, REITs, bonds, and gold. And as you can see, when the interest rates are high, that's when bonds typically do okay. But when interest rates go down, that's when the US Stock Market, as well as

REITs dominate the rest of the market. The takeaway is that if you like to invest your money into stocks, the effect of rate cuts is more complicated than rates go down, stocks go up. And certain stocks perform better than others after a rate cut, according to research from Schwab. Again, dividend-paying sectors like utilities and real estate tend to outperform the broader market in a low-rate environment. This is because these companies typically carry a big amount of debt, and lower rates reduce their borrowing costs, which makes them more profitable. So, if you're a dividend investor, which I personally am, this is really good news. And lower interest rates also have a positive effect on bond prices. And I like to think of bonds as a super stable, guaranteed return on my grandpa-like asset. And it makes bonds more expensive because as interest rates go down, bond prices go up. Now, I'm going to assume that most of us don't invest in the bond market unless we have a lot of money or we're protecting our wealth. So, that means you're probably not

very busy watching my YouTube channel, but if you are, you're probably a retired Finance nerd, so thank you so much for watching my boring videos. But next up, I want to show you what happens to bitcoin. So now that interest rates are going down, I'm super excited to see what stocks will do depending on who gets selected. And I've been tracking that information using today's sponsor, Mumu, an investment platform that provides pro-grade tools, data, and insights to investors in the US, Canada, and Australia. And using the search feature, I can look up either Harris or Trump, and it will show me a list of stocks that could potentially benefit if either one was elected. But Mumu can also help you find stocks influenced by the rate cut, making it super easy. And another standout feature is Mumu's Cash sweep, which right now offers a market-leading 8.1% APY on uninvested cash for the first 3 months, and then 5.1% after that, beating most mainstream brokerages. There's no minimum

deposit or balance requirements and your cash AC Crews interest automatically, making sure that you maximize your earnings without any extra effort, and that cash is always available for trading or withdrawal. And if you've ever been super frustrated like I have because you're not able to buy and sell stocks outside of normal trading hours, Mumu allows you to trade up to 16 hours a day, covering both pre-market and post-market sessions, so you can react to the news and the market changes in real time, and that means not missing out on opportunities. And finally, Mumu offers commission-free trading on US Stocks, ETFs, and options, with no account maintenance fees or contract fees for options. And the best part is that right now, Mumu is offering up to 15 free stocks for new users when you sign up using my link in the description below. And for my US audience, Mumu gives you the chance to earn up to 15 free stocks when you sign up, just deposit $1,000 and maintain an average asset balance for 60

days to unlock all 15 free full shares. Plus, if you transfer money to the app, you'll receive 1.5% cash back on your initial transfer of up to $300. For my Australian audience, Mumu is chess sponsored in Australia and offers Cash Plus, which is similar to the cash site. Don't forget to click the link below in the description for full details on the terms and conditions. Get your free stocks. Thank you, Mumu, for sponsoring this segment of the video. And now, let's get back to it. So, the other question I had is what happens to crypto and Bitcoin when interest rates go down. And I'm going to show you what I think will happen in the next 12 months by using gold as an example. Gold has already gone up significantly in 2024. It's up 25%. But let me show you something that's going to blow your mind. Because at the start of 2024, gold's market cap was about $1.13 trillion. Right now, it's roughly $17.5 trillion.

trillion. That's an increase of $3.7 trillion. Bitcoin's market cap, on the other hand, is about $1.1 trillion. And that means this year alone, gold went up 3.3 times the entire size of Bitcoin's market cap. That's how small Bitcoin still is. Now, for gold, that $3.7 trillion increase meant that gold went up from $2,000 an ounce at the start of 2024 to $2,500 an ounce right now in September 2024. A $500 increase, which is amazing. But here's the million-dollar question, though. Do you think Bitcoin could match the same price performance as gold? If you think it can, if you think that Bitcoin can still experience the same market cap increase, then Bitcoin could go up by a factor of 3.3x. That means roughly $558,000 a coin that it's at now to $174,000 a coin. But really, it depends on the Fed's monetary policy and what they'll do going forward. For example, when the Fed slashed rates to almost

zero in 2020. Bitcoin went up from around 7,000 a coin to over 60,000 by April 2021. But this also around the time, if you remember, when institutional money like MicroStrategy and Tesla started adding Bitcoin to the balance sheet because they wanted something other than those low-yielding bonds. That's why Bitcoin did so well. Bitcoin's price is linked to market liquidity, aka the availability of money, and lower interest rates mean the availability of money increases. And MicroStrategy, again, is loading up on more Bitcoin, even at these prices. So, for long-term holders and buyers, I think it's really good news. But now the question is, what does this mean for borrowers and savers? Now, the good news is if you want to borrow money, banks should now have a lower interest rate for loans, making it easier to buy homes and cars and to take out loans for businesses. But the bad news is if you've been enjoying those interest rates on your savings accounts or CDs, that's also about to change. The average interest rate on a high-yield savings account

reached 5.25% in August 2024, but with the FED cutting rates, banks have already lowered their savings rate. Historically, we have seen rates fall by a quarter percent to a half percent within a couple of weeks of a Fed cut. For example, during the last rate-cutting cycle in 2019, the national average savings rate dropped from 2.2% to just under 1% in less than 3 months. So, if you want to keep your money in a savings account, consider locking in that higher rate with a longer-term CD or look for those longer maturity dates. On the other hand, if you want to borrow money, this is really good news. The cost of a 30-year mortgage rate, which hit a 20-year high of about 8% last year, should start to go down. As of September 2024, the average 30-year fixed mortgage rate is 6.2%, but we could see that drop by a quarter to a half percent in the coming months if the FED continues to cut rates.

example: after the Fed's last rate cut in 2019, mortgage rates dropped by around 75% so 34s over the course of the following 6 months. So, if you have a high-interest rate on your home, consider refinancing when the rates start to come down. But remember, this is also not just limited to mortgages. If you have a car loan, student loan, or even a credit card, rates should also start to come down. And credit cards, by the way, which are directly linked to the federal fund rates, saw an average rate drop from 177% in 2019 to around 14% by mid-2020 after those rate cuts. Either way, though, experts say you should never carry a balance, and instead, they say you should transfer to a 0% APR offer and aggressively pay down your high-interest rate debt. Now, if you made it this far into the video, here's my personal opinion and how I'm going to invest. When it comes to stocks, my gut feeling is that initially, the stock market will go

down, and that's because I think the rate cuts have already been priced in. So, I think it will be a buy the rumor, sell the news kind of thing. In the long term, I can't argue with the data that says over the next 12 months, the stock market goes up in 86% of cases. So, unless something happens outside of what we know about, then it should go up. And for Bitcoin, I think the next 12 months are going to be super interesting because Bitcoin tends to lag behind Gold's performance. So, first, gold goes up, and then Bitcoin goes up. Not in all cases, but I think Bitcoin is significantly undervalued relative to Gold's market cap. So, personally, here's how I've been investing. I've split my net worth into four different categories that I'm somewhat equally invested in: 25% in real estate, 25% in Bitcoin, 25% in stocks, and 25% in cash. I'm still buying the S&P 500 via the VTI ETF at $100 a day. I'm still

reinvesting all of my dividend income back into my dividend stocks, which is projected to grow to a sizable income in just a couple of decades automatically. I bought quite a bit of Bitcoin because, just like Michael Saylor, I think in the long term, Bitcoin will outperform virtually every other asset class, including especially gold. And finally, my rental property is also fully rented. It's going on 2 years now, and it's cash flowing at a 2.5% loan, and it helps lower my taxes. But I don't really plan on buying any more real estate for now. I'd love to hear how you're investing and what you think will happen to the market. And as always, I hope you have a wonderful rest of your day. Smash the like button, subscribe if you haven't already, don't forget to grab those free stocks. Links are down below. Go track them automatically with a spreadsheet link down below in my Patreon. Thank you so much for watching this video. I'd love to see you back here next week. I'll see

The Fed Just Changed Everything - What You Need To Know NOW!

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Federal Reserve's Interest Rate Cut and Its Impact

The Federal Reserve has cut interest rates by half a percent, a move that could significantly impact the economy, stock market, and personal finances.

This decision follows a period of aggressive rate hikes to combat inflation, which has now cooled down to 2.

Historically, rate cuts have led to positive returns in the stock market, with the S&P 500 posting gains in 86% of cases within 12 months after a cut.

The Impact of FED Rate Cuts on Investments

The FED's pivot to lower rates has been beneficial for investors in 86% of cases, although recessions can disrupt this trend.

The stock market predicts an 8% chance of a recession in 2024, with a 56% chance before 2026.

Lower rates generally boost stock prices by reducing borrowing costs for companies, but the relationship is complex, with some instances of the stock market declining after rate cuts.

The Impact of Interest Rates on Bitcoin and Stocks

The speaker is excited to track stock movements based on the upcoming election and interest rate changes, using the investment platform Mumu for insights.

1% APY on uninvested cash, 16-hour trading days, and commission-free trading, along with a promotion of up to 15 free stocks for new users.

The speaker also discusses the significant rise in gold's market cap in 2024, drawing a parallel to potential changes in Bitcoin and crypto as interest rates decrease.

7 trillion in 2024, outpacing Bitcoin's $1.

This surge raised gold's price from $2,000 to $2,500 an ounce.

If Bitcoin matches gold's performance, it could rise to $174,000 a coin, but this depends on the Fed's monetary policy and market liquidity.

Impact of Federal Rate Cuts on Debt and Investments

Federal rate cuts in 2019 led to a significant drop in mortgage rates and other loans, including credit cards.

Experts recommend refinancing high-interest debts and transferring to 0% APR offers.

The speaker's investment strategy involves diversifying their net worth equally across real estate, Bitcoin, stocks, and cash.

Personal Investment Strategy and Market Outlook

The speaker is reinvesting all dividend income into dividend stocks, expecting significant growth over the decades.

They have invested in Bitcoin, believing it will outperform other asset classes, including gold.

The speaker's rental property is fully rented, cash flowing at a 2.

5% loan, and they don't plan on buying more real estate for now.