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What's the mechanism for that drop? The Fed doesn't just drop interest rates when everything is going well in the economy. The usual trigger is that some exog

What's the mechanism for that drop? The Fed doesn't just drop interest rates when everything is going well in the economy. The usual trigger is that some exogenous crisis happens like the Asian financial crisis, the global financial crisis, or COVID-19, and then the Fed drops to stimulate economic activity. Take a financial crisis out of the picture, because everyone who assumes there will be no financial crisis is explicitly taking a financial crisis out of the picture. Why would the Fed drop rates?

kjksf 4y ago
For one there's an election in 2024. High interest is killing stock market returns. No administration wants to enter election season with decimated stock market. Hence, if nothing else, there will be political pressure on FED to lower interest rates to juice up stock market. Second, some kind of recession is expected by many so if it happens, that will a reason to cut rates.
- lesuorac 4y ago
  [Citation Needed] The fed historically does take actions adverse to employment in election years. https://www.advisorperspectives.com/commentaries/2016/08/25/fact-32-of-our-past-60-rate-hikes-were-in-election-years https://www.advisorperspectives.com/commentaries/2016/08/25/...
- ac29 4y ago
  > High interest is killing stock market returns. The stock market (as measured by SP500) is down only 15% from its all time high, and is currently higher than any point before 2021.
- nostrademons 4y ago
  Only 55% of Americans own stock at all, only 35% in a non-retirement account [1], and the top 20% of earners own 87% of equities [2]. In polling, the stock market is not a significant factor in most Americans' vote. Stockholders tend to dramatically overestimate their numbers and importance. Inflation, however, will reliably kill a presidency. Note that we went through 4 presidents in the 8 years of the 1970s inflation, while the average president in the 40 years afterward served for 8 years. This holds universally across cultures as well - globally, countries like Venezuela, Zimbabwe, Weimar Germany, post-war Eastern Europe, etc. go through rapid regime change during periods of high inflation. [1] https://www.pewresearch.org/fact-tank/2020/09/25/few-in-u-s-owned-stocks-outside-of-401ks-in-2019-fewer-said-market-had-a-big-impact-on-their-view-of-economy/ https://www.pewresearch.org/fact-tank/2020/09/25/few-in-u-s-... [2] https://financebuzz.com/how-many-americans-own-stocks https://financebuzz.com/how-many-americans-own-stocks
francisofascii 4y ago
Odds are there will be an economic downturn in the next ten years. Why? Because their usually is. It doesn't need to be a huge crisis. And that is when the Fed will drop rates.

kjksf 4y ago

For one there's an election in 2024. High interest is killing stock market returns. No administration wants to enter election season with decimated stock market. Hence, if nothing else, there will be political pressure on FED to lower interest rates to juice up stock market. Second, some kind of recession is expected by many so if it happens, that will a reason to cut rates.

lesuorac 4y ago
[Citation Needed] The fed historically does take actions adverse to employment in election years. https://www.advisorperspectives.com/commentaries/2016/08/25/fact-32-of-our-past-60-rate-hikes-were-in-election-years https://www.advisorperspectives.com/commentaries/2016/08/25/...
ac29 4y ago
> High interest is killing stock market returns. The stock market (as measured by SP500) is down only 15% from its all time high, and is currently higher than any point before 2021.
nostrademons 4y ago
Only 55% of Americans own stock at all, only 35% in a non-retirement account [1], and the top 20% of earners own 87% of equities [2]. In polling, the stock market is not a significant factor in most Americans' vote. Stockholders tend to dramatically overestimate their numbers and importance. Inflation, however, will reliably kill a presidency. Note that we went through 4 presidents in the 8 years of the 1970s inflation, while the average president in the 40 years afterward served for 8 years. This holds universally across cultures as well - globally, countries like Venezuela, Zimbabwe, Weimar Germany, post-war Eastern Europe, etc. go through rapid regime change during periods of high inflation. [1] https://www.pewresearch.org/fact-tank/2020/09/25/few-in-u-s-owned-stocks-outside-of-401ks-in-2019-fewer-said-market-had-a-big-impact-on-their-view-of-economy/ https://www.pewresearch.org/fact-tank/2020/09/25/few-in-u-s-... [2] https://financebuzz.com/how-many-americans-own-stocks https://financebuzz.com/how-many-americans-own-stocks

francisofascii 4y ago

Odds are there will be an economic downturn in the next ten years. Why? Because their usually is. It doesn't need to be a huge crisis. And that is when the Fed will drop rates.