📅 Global Impacts Study Before the Coming 2024 Fed Rate Cuts

The US 🗣️Federal Reserve's interest rate is expected to cut since sep.18th 2024📅.

Usually the rate cut decisions have far-reaching effects on the global economy and financial markets.

Here is an explanation of the main impacts that may arise from the Federal Reserve's interest rate cuts:

1. Global Impact:

   • Federal Reserve rate cuts typically lead to a decline in global bond yields, as U.S. Treasury bonds $Micro 10-Year Yield - main 2409(10Ymain)$ , serving as a benchmark for global asset pricing, will see their yields fall, driving down yields across the global bond market.

   • With reduced financing costs, businesses and individuals are more inclined to borrow, which may stimulate consumption and investment, thereby boosting the growth of the U.S. economy.

2. Financial Market Impact:

   • Rate cuts tend to diminish the appeal of holding U.S. dollar assets, leading to capital outflows in search of higher returns abroad. This could increase investment in foreign assets, such as stocks and bonds.

   • As the discount rate declines, corporate valuations may increase, which could put upward pressure on the stock market, particularly evident in growth stocks.

3. Impact on Gold Prices: $Gold - main 2412(GCmain)$

   • Rate cuts usually reduce the opportunity cost of holding gold, as gold does not generate interest. With downward pressure on the U.S. dollar, gold's appeal as a safe-haven asset increases, potentially leading to a rise in gold prices.

4. Impact on the U.S. Dollar Exchange Rate: $USD Index(USDindex.FOREX)$

   • Rate cuts may lead to a weaker U.S. dollar as investors seek higher-yielding currencies. The downward pressure on the dollar could prompt international investors to diversify risks and adjust their portfolios.

5. Impact on the Energy Market: $WTI Crude Oil - main 2410(CLmain)$

   • Oil-producing countries may adopt "production cuts and price increases" strategies when the U.S. dollar is weak to increase revenues and balance budgets. At the same time, oil-importing countries may seek to increase oil reserves to cope with potential future cost increases.

   • With global economic growth, the demand for energy and resources may increase, which could drive up international oil prices.

6. Impact on Global Stock Markets:

   • Expectations of economic growth may drive an increase in global stock markets, especially in the energy and resource sectors. Investors may seek stocks that benefit from global economic growth to obtain higher returns.

In summary, the Federal Reserve's interest rate cut decisions affect the global economy and financial markets through various channels, including bond yields, currency values, commodity prices, and stock market performance.

Investors and policymakers need to closely monitor these changes to make corresponding strategic adjustments.