Monetary Policy Vs Stock Market

Have a look at this chart, which shows a striking similarity between today and the late 1990s:

The #Fed raised #rates aggressively in 1994, followed by small cuts in 1995, and then held them steady through 1998. In October of that year, the Fed eased three times, fearing the LTCM crisis would drag the economy into #recession.

What did the stock market do back then? The SP 500 dropped 20% on the LTCM crisis in October 1998, rallied back within two months , and then the #bull #market turned parabolic on rate cuts, led by the Four HorsemenIntel, Dell, Cisco, and Microsoft.

Fast forward to today: the Fed raised rates aggressively in 2022/23, followed by three cuts in 2024 and has held them steady till today. Back in April, SPY #crashed nearly 20% on recession fears triggered by Liberation Day, rallied back in two months, and has since been making new highs on expectations of renewed Fed easing.

Chair #Powell cut rates 25 bps today, as expected and will continue to ease this year. Will the stock market turn parabolic this time, as it did in 19981999? What are the key differences between now and then?