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On September 17, 2025, the Federal Reserve announced that it would lower the target range of the federal funds rate by 25 basis points to 4.00%-4.25%.This is the first time the Federal Reserve has restarted its interest rate cut cycle since December 2024, marking a turning point in monetary policy shifting from tightening to easing.This decision was not an accident – the market had priced an 86% rate cut probability long before the meeting, but the signals behind it sparked widespread discussion: signs of economic slowdown, weak employment markets, unemployment rate rose to 4.3%, and inflation stabilized, but it was still above the 2% long-term target.Federal Reserve Chairman Jerome Powell emphasized at a press conference that the rate cut is a “risk management” measure aimed at balancing employment and price stability, rather than directly responding to recession.
According to the Federal Reserve’s latest economic forecast summary (SEP), committee members expect the median federal funds rate to drop to 3.50%-3.75% by the end of 2025, which means there will be two more 25 basis points cuts this year, which will be implemented at the October and December meetings respectively.By 2026, interest rates may further fall to 3.25%-3.50%.This “dot map” shows that 9 of the 19 members support the range of 3.50%-3.75% by the end of the year, and only one person (suspected to be the new director Stephen Milan) advocates a more radical 2.75%-3.00%.These projections reflect the Fed’s optimism about economic growth—the median GDP growth rate in 2025 rose to 1.6%, up from 1.4% in June—but also implicit uncertainty: political pressure, geopolitical risks and potential inflation rebounds may disrupt the pace.
If you are an investor, this cycle of interest rate cuts is undoubtedly a key node.In the past 25 years, the Fed’s interest rate path has fluctuated like a roller coaster: after the global financial crisis (GFC), interest rates fell to nearly zero, stimulating the recovery of the financial system; during the epidemic, it bottomed out again, driving asset prices to soar, and mortgage interest rates fell below 3%.The loose policy triggered a surge in inflation, and the Federal Reserve turned to quantitative tightening (QT) and aggressive interest rate hikes, pushing interest rates to a peak of 5.25%-5.50%.In mid-2024, the policy shifted to suspending interest rate hikes, and now the interest rate cuts have been restarted, and the monetary environment has been looser again.This is not just an interest rate adjustment, but also a signal: the Federal Reserve prioritizes preventing employment risks rather than out of control of inflation.
Historical Mirror: Stock Market Performance Under Rate Cut
To understand the current situation, you might as well review history.Rate cuts are often the “catalyst” for the stock market, especially when the market is approaching historical highs.According to JPMorgan Chase Trading Station data, since 1980, when the Fed started a rate cut cycle when the S&P 500 index is within 1% from its historical high, the index rose by nearly 15% in an average of one year.Based on September 17, the S&P 500 closed at 6619 points at the time, only 0.1% from the intraday record, perfectly fitting this model.JPMorgan analysts pointed out that this “rate cut in a non-recession environment” will drive the index to rise by about 17% in the next 12 months, consistent with the actual performance since 2024.
More detailed statistics reinforce this view.LPL Financial analyzed the performance of the S&P 500 after the first rate cut in the past 50 years: an average return of 4.9% within one year, with a positive return probability of nearly 70%.But the short-term reaction was moderate – a month after the rate cut, the market rose by only 0.1% on average and a median of 0.4%, which is essentially a consolidation after the “selling news”.Seeking Alpha data shows that since 1980, the median return of the S&P 500, similar to a high-rate cut, was -0.31% (30 trading days), with an average of -1.20%, but this is often short-term noise, and the bull market continues in the long run.
Specific time nodes:
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Until mid-October
The probability of 50% increases, with an average return of 0.1%.This means that the market may be sideways or fine-tuned in the short term, which is suitable for conservative investors to wait and see.
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Until mid-December
The probability of 77.3% is higher than the September 17 level, with an average increase of 3.4% and a median of 5.5%.Historical data show that Christmas Eve is often the climax of the “end of the year effect”, and capital inflows drive a rebound.
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By mid-March 2026
72.7% probability of positive returns, continuing the loose dividend.
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One year later (September 2026)
100% historical winning rate, average 13.9%, median 9.8%.In extreme years, it can reach 20%-30%, such as the technology bull market in the 1990s.
These data are not iron laws.Visual Capitalist pointed out that the return range of interest rate cut cycles in the past is wide, from +36.5% to -36%, depending on the economic background.The current environment is more similar to the “melt-up” from 1995 to 1999: low inflation, strong profits and technology-driven (such as AI).BlackRock multi-asset team data shows that large-cap stocks (S&P 500) are better than small-cap stocks (Russell 2000) on average in the rate cut cycle because the latter is more sensitive to interest rates, but slower earnings may offset dividends.
If you are a novice, don’t rush to chase high prices.Historical warning: The market response in the early stage of interest rate cuts is flat. If you miss the entry, you will face “chasing the rise and selling the fall” at the end of the year.As an advanced strategy, consider writing covered calls on long positions: if the market is sideways, you can still make profits from the option premium.Data shows that this strategy can have an annualized return of 5%-8% during low volatility periods.
The Fed’s “firewall”: 20% callback is a V-shaped rebound?
There are always doubters in the market: the stock market is overvalued, similar to the Internet bubble in 2000; the recession is imminent, and the S&P 500 Shiller CAPE ratio reaches the third highest in history (second only to 1999-2000).David Rosenberg warned that this indicates a “giant price bubble” with a possible 10-year return.But history refuted the argument that “this time is different”.In 2020, the unemployment rate soared to 14.8%, and the economy fell into recession, but the S&P 500 rose 16% against the trend (including 18% dividend).Why?The Federal Reserve printed $4 trillion in money, QE restarted, and the stock market was decoupled from the economy.
My opinion: The stock market decline of more than 20% is almost impossible to continue.The Fed has viewed the stock market as “too big to fall.”If S&P 500 falls by 25%, it will trigger systemic risks – pension sell-offs, credit tightening, and a surge in bad debts in banks.In the Powell era, the Federal Reserve promised “asymmetric intervention”: interest rate hikes are gradual and interest rate cuts are rapid.In 2025, the M2 money supply has reached US$22.12 trillion (July data, an increase of 4.5% year-on-year, a high in the past three years), setting a record high.If the market crashes, the Fed will restart QE, print trillions of dollars, and create a V-shaped rebound.Lessons for 2020: After the March low, the index rebounded by 50% in three months.
Of course, the risks remain.Leveraged investors need to be vigilant: a 20%-25% pullback can instantly smooth out margin accounts.Recommendation: Control the position at 60%-70% to avoid deep leverage.Statistics show that excessive leverage survives less than 30% in bear markets.Remember, the stock market is not economic – profit growth is at the core.S&P 500 EPS is expected to be $325 (LPL forecast) in 2025. If the AI investment return appears, the valuation expansion can reach 23.5 times, pushing the index to 7640 points (30% increase).
Dollar Weakness: Gold, Silver and Bitcoin Fabulous
The other side of the interest rate cut is the weakening of the US dollar.After September 17, the US dollar index (DXY) briefly fell 0.3%, closing at 97.53 (September 19), down 3.18% this year.Trading Economics data shows that this is the worst performance in the first half of the year in 50 years, but the 40-year chart shows that there is huge downside: DXY can fall below 95.Low interest rates reduce the attractiveness of the dollar, and funds flow to emerging markets and commodities.
It doesn’t make sense to compare other fiat currencies – as the video says, it’s more accurate to measure the depreciation of the dollar in gold.The current spot price of gold is $3,688.85 per ounce (September 19), up more than 30% this year.Rate cuts are the “tailwind” of gold: opportunity costs are reduced and risk-haven demand is heating up.Deutsche Bank raised its average price in 2026 to $4,000, and Goldman Sachs predicts $3,800 by the end of the year.LongForecast is expected to be $3,745 at the end of September and a October high of $4,264.reason?M2 surges, more depreciating the dollar chases limited gold supply.Similarly, silver prices followed up, with an estimated $45 per ounce at the end of the year.
Bitcoin also benefits: As “digital gold”, BTC rose an average of 25% during the weak period of the US dollar.At the current US$70,000 mark, if DXY falls below 96, BTC may rise to 80,000.The video emphasizes: Fiat currency is stupid, gold is the real anchor.
Inflation concerns and investment strategies: Don’t let cash depreciate
The money supply M2 reached 22 trillion yuan, a record high, indicating inflationary pressure.Although the Fed controls inflation at 2.5%-2.7%, Trump’s tariffs may push up CPI.Video core: Don’t sit idly by and watch cash erode by inflation.Global GDP increased by 3% in 2025 (IMF forecast), and US stock market surge continued: Yardeni Research said that S&P 500 may reach 10,000 points (60% increase) by 2030.Simple strategy: buy on dips and hold high-quality assets.
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Cash buffer
Retain living expenses for June-December, and use money funds for large short-term expenditures (4%-5% annualized).
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Diversification
60% stocks (tech + consumption), 20% bonds, 10% gold/bitcoin, 10% cash.BlackRock recommends increasing allocation of alternative assets to buffer volatility with low correlation.
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Risk Management
If the correction is 20%, it is considered a buying opportunity.History shows that the melt rises non-straight line—there were three 10% pullbacks in the 1990s, but the bull market continued.
This is not a prediction, but a data-based perspective.The Federal Reserve’s “money printing machine” restarted, and the game of fusion continued.If you believe “this time is different”, you will be a minority.Take action and don’t be left behind by FOMO.But be cautious: although the market is rigged, it is not risk-free.In 2025, opportunities and traps coexist, and the choice is in hand.
