What happens to stocks after the Fed starts cutting rates?
Rate cuts are often cheered as good for stocks, but the Fed usually cuts because the economy is weakening. History shows the first cut can mark either a fresh leg up or the start of a bear market, depending on whether a recession follows.
Updated Oct 9, 2026
+13% a year later, on average
The Fed has started 9 rate-cutting cycles since 1982. A year after the first cut, the S&P 500 was higher 7 times out of 9, by 13% on average with dividends. What mattered was the economy: when no recession followed, the index gained 22% on average; when one did, it lost 4%.
Two paths
The average S&P 500 return in the two years after a first cut, split by whether a recession followed.
Every cutting cycle since 1982
The day of the first cut and the S&P 500’s return with dividends afterwards. Total cuts counts the cycle until the next hike. Select a column to sort.
| First cut | Economy | Total cuts | 3 months | 6 months | 1 year | 2 years |
|---|---|---|---|---|---|---|
Sep 18, 2024 From 5.50% | No recession | 1.75 pts | +7% | +2% | +19% | +39% |
Jul 31, 2019 From 2.50% | Recession | 2.25 pts | +8% | +14% | +19% | +59% |
Sep 17, 2007 From 5.25% | Recession | 5.00 pts | −1% | −11% | −17% | −27% |
Jan 2, 2001 From 6.50% | Recession | 5.50 pts | −11% | −9% | −13% | −31% |
Sep 28, 1998 From 5.50% | No recession | 0.75 pts | +17% | +26% | +31% | +47% |
Jul 5, 1995 From 6.00% | No recession | 0.75 pts | +5% | +12% | +18% | +73% |
Jun 5, 1989 From 9.81% | No recession | 5.31 pts | +8% | +9% | +15% | +25% |
Sep 19, 1984 From 11.50% | No recession | 3.38 pts | 0% | +10% | +16% | +55% |
Sep 30, 1982 From 10.25% | No recession | 1.75 pts | +10% | +22% | +32% | +36% |
How to read this page
How it’s measured. Fed funds target rate changes from FRED since 1982. A cycle starts with the first cut after at least a year without one. Returns are the S&P 500 with dividends, from Robert Shiller’s monthly data. A recession followed if one began within twelve months of the first cut, by the official NBER dates.
Sources. Daily prices from Financial Modeling Prep; economic data from FRED, the Federal Reserve Bank of St. Louis.
Only a handful of cycles exist, so averages swing with each one. The split by recession is clear in hindsight; at the time of the first cut, nobody knows which path lies ahead.
Returns use monthly average prices, so they differ slightly from returns measured between exact dates.
This page is information, not investment advice. About our data and methods ›