The common belief that interest rate cuts are good for the stock market is not true

Oh Keonyoung, head of Shinhan Bank's Pathfinder, explained that the common belief that interest rate cuts immediately lead to gains in the stock market is not always true based on the data. He said the market does not move like a fixed formula, and that the economic cycle has a greater impact on stock prices than interest rates. He pointed to cases such as COVID19, the global financial crisis, and the collapse of the dotcom bubble, noting that although rates were cut significantly at the time, the stock market was shaken even more severely. An interest rate cut can help ease a sharp shock, but if growth continues to slow, it is difficult to support stock prices. He also explained that the price indicators the Fed emphasizes and the indicators the market reacts to sensitively are different. He added that while the Fed uses core PCE, excluding food and energy, as its benchmark, the market tends to react more quickly to CPI, which is released earlier.