The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.

Back to normality?

A strange thing happened after the Federal Reserve, the US central bank, announced its sixth rate cut of the year: nothing. Before and after the other five rate cuts this year the stock market reacted with gusto. This time, there was hardly a flicker of recognition.


That is how it should be. Interest rate cuts aren't there to provide immediate and false relief to the stock market; they don't have the power suddenly to make bad corporate earnings disappear, or to reverse the losses suffered by millions of investors, retail and institutional, who threw their money at poor companies. And it looks as if market participants have finally learnt what is in essence Fed rate cuts lesson 101.


Stocks rocketed ahead after the Fed's exceptionally well-timed first rate cut at the start of January. But that wasn't done for the stock market's benefit; rather its purpose was to stave off an impending credit crunch that had been brewing since the latter half of 2000. A series of defaults on loans and commercial paper programmes by companies regarded just months before as solid investment-grade credits had forced spreads to their widest levels in living memory.



You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree