Seek Refuge in Hard Assets Amid the Fed’s Rate Cut

The Fed’s Shocking Move

Carlos Pascual
Asymmetric Finance

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Last Sunday, we warned you that we were about to experience one of the most important weeks of the year, and that’s exactly what happened.

As many of you know, the FED announced a 0.5 basis point rate cut, the first one in over a year, and much more abrupt than what we’re used to.

From our perspective, they are merely correcting the mistake of not having started to lower rates back in July.

What does this imply? On one hand, people will now have access to much cheaper credit, which acts like pure caffeine for high-risk assets. This week, we’ve seen the Nasdaq rise by 2%, and Bitcoin nearing double-digit growth.

Although so far, everything may seem like a fairy tale, not all that glitters is gold (gold has also appreciated by 1.5% this week). Critics have quickly pointed out that this could be the beginning of the end.

They all rely on the same chart: whenever the Federal Reserve has decided to cut rates by 0.5 points in the last 30 years, it has almost always signaled the start of a major crisis.

With more than 50% declines in the Nasdaq in 2000 and 2008, the historical record shows that abrupt rate cuts have often been followed by steep downturns.

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