History Warns: S&P 500 Often Slips After Fed Rate Cuts
The Federal Reserve is widely expected to lower interest rates by 25 basis points later on Wednesday, bringing the federal funds target to 4.00%-4.25%—a policy shift that, while highly anticipated, may offer little fuel to a stock market already trading at all-time highs if history is any guide.
Over the past 25 years, the S&P 500 has often struggled following a Fed rate cut.
According to data from Seasonax, the benchmark index delivered a median return of -0.31% in the 30 trading sessions following a rate reduction. The average return was even worse, at -1.20%, with more than half of the past 31 cuts followed by negative returns.
S&P 500: 30-Day Returns After Fed Rate Cuts (2001–2025)
| Cut Date | Start Price | End Date | End Price | Change (%) |
|---|---|---|---|---|
| 03 Jan 2001 | 1,347.56 | 15 Feb 2001 | 1,326.61 | -1.55% |
| 31 Jan 2001 | 1,366.01 | 15 Mar 2001 | 1,173.56 | -14.09% |
| 20 Mar 2001 | 1,142.62 | 02 May 2001 | 1,267.43 | +10.92% |
| 18 Apr 2001 | 1,238.16 | 31 May 2001 | 1,255.82 | +1.43% |
| 15 May 2001 | 1,249.44 | 27 Jun 2001 | 1,211.07 | -3.07% |
| 27 Jun 2001 | 1,211.07 | 09 Aug 2001 | 1,183.43 | -2.28% |
| 21 Aug 2001 | 1,157.26 | 09 Oct 2001 | 1,056.75 | -8.69% |
| 17 Sep 2001 | 1,038.77 | 29 Oct 2001 | 1,078.30 | +3.81% |
| 02 Oct 2001 | 1,051.33 | 13 Nov 2001 | 1,139.09 | +8.35% |
| 06 Nov 2001 | 1,118.86 | 19 Dec 2001 | 1,149.56 | +2.74% |
| 11 Dec 2001 | 1,136.76 | 25 Jan 2002 | 1,133.28 | -0.31% |
| 06 Nov 2002 | 923.76 | 19 Dec 2002 | 884.25 | -4.28% |
| 25 Jun 2003 | 975.32 | 07 Aug 2003 | 974.12 | -0.12% |
| 18 Sep 2007 | 1,519.78 | 30 Oct 2007 | 1,531.02 | +0.74% |
| 31 Oct 2007 | 1,549.38 | 13 Dec 2007 | 1,488.41 | -3.94% |
| 11 Dec 2007 | 1,477.65 | 25 Jan 2008 | 1,330.61 | -9.95% |
| 22 Jan 2008 | 1,310.50 | 05 Mar 2008 | 1,333.70 | +1.77% |
| 30 Jan 2008 | 1,355.81 | 13 Mar 2008 | 1,315.48 | -2.97% |
| 18 Mar 2008 | 1,330.74 | 30 Apr 2008 | 1,385.59 | +4.12% |
| 30 Apr 2008 | 1,385.59 | 12 Jun 2008 | 1,339.87 | -3.30% |
| 08 Oct 2008 | 984.94 | 19 Nov 2008 | 806.58 | -18.11% |
| 29 Oct 2008 | 930.09 | 11 Dec 2008 | 873.59 | -6.07% |
| 16 Dec 2008 | 913.18 | 30 Jan 2009 | 825.88 | -9.56% |
| 01 Aug 2019 | 2,953.56 | 13 Sep 2019 | 3,007.39 | +1.82% |
| 19 Sep 2019 | 3,006.79 | 31 Oct 2019 | 3,037.56 | +1.02% |
| 31 Oct 2019 | 3,037.56 | 13 Dec 2019 | 3,168.80 | +4.32% |
| 03 Mar 2020 | 3,003.37 | 15 Apr 2020 | 2,783.36 | -7.33% |
| 16 Mar 2020 | 2,386.13 | 28 Apr 2020 | 2,863.39 | +20.00% |
| 18 Sep 2024 | 5,618.26 | 30 Oct 2024 | 5,813.67 | +3.48% |
| 07 Nov 2024 | 5,973.10 | 20 Dec 2024 | 5,930.85 | -0.71% |
| 04 Feb 2025 | 5,872.16 | 17 Mar 2025 | 6,037.88 | +2.82% |
Historical Results:
- Median Return: -0.31%
- Average Return: -1.20%
- Number of Gains: 14
- Number of Losses: 17
Why It Happens: The Market Moves Before The Fed
Investors don’t wait for the Fed to act. Stocks often rise in anticipation of monetary easing — especially when economic data supports the move. But once the rate cut arrives, the upside tends to be limited because the move is already priced in.
This cycle might be no different. Since the Jackson Hole meeting on Aug. 22, where Fed Chair Jerome Powell signaled an imminent rate cut, the S&P 500 index – as tracked by the Vanguard S&P 500 ETF VOO – has already climbed nearly 4% in under a month.
There’s also a deeper issue: rate cuts aren’t always a good sign. In many cases, they come as a response to economic weakness, deteriorating earnings, or a worsening job market — none of which are favorable for equities in the medium term.
The bottom line? Fed rate cuts aren’t automatic fuel for rallies. More often than not, they’re a sign the party is nearing its end.
Chart: The S&P 500 Soared After Powell’s Jackson Hole Pivot
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Image created using artificial intelligence via Midjourney.
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