The movement of the stock market during the previous rate cut period is closely related to the time when the rate cut began and to the horizontal or the period of increase. When interest rates began to fall, the stock market had a variety of reactions, which depended on the economic situation at the time, market expectations, and the confidence in the central bank’s interest rate policy. Below, we will look at the timing of major interest rate declines and analyze how the stock market reacted when the rate was first cut after the rate went sideways after the rate hike.

1. early 1980s
   Background: In the early 1980s, the U.S. Federal Reserve raised interest rates significantly to curb high inflation. It then began cutting rates once inflation stabilized.
   Rate Hike: From 1979 to 1981, the Fed continued to raise interest rates.
   Rates sideways and first rate cuts: from mid-1981 to early 1982, rates were sideways at their highest levels, and rate cuts began in mid-1982.
   Stock Market Reaction: The stock market was volatile during the sideways movement after the end of the rate hike, but the stock market turned higher after the first rate cut. The S&P 500 was up about 30% from August 1982 to 1983.
2. 1990–1992
   Background: In the early 1990s, the U.S. economy went into recession. The Fed cut interest rates to support economic growth.
   Rate Hike: From 1988 to 1989, the Fed raised interest rates to curb economic overheating.
   Rates sideways and first rate cuts: rates remained at high levels from late 1989 to early 1990, and rate cuts began in July 1990.
   Stock Market Reaction: At the time of the first rate cut, the stock market was already in decline, but the decline continued even after the rate cut began. However, from the beginning of 1991, the stock market began to recover and rise. The S&P 500 rose about 26% from July 1990 to the end of 1991.
3. After the dot-com bubble burst in 2001
   Background: As the dot-com bubble burst sent the economy into recession, the Fed began cutting interest rates.
   Rate Hike: From 1999 to 2000, the Fed tried to curb the economy’s overheating by raising interest rates.
   Rates sideways and first rate cuts: After rates peaked in late 2000 and were sideways, the Fed began cutting rates in January 2001.
   Stock Market Reaction: The stock market temporarily rebounded shortly after the first rate cut, but continued its downward trend as the economic downturn intensified. The S&P 500 fell sharply after the Sept. 11, 2001, terrorist attacks, but then gradually began to recover.
4. 2007-2009 Global Financial Crisis
   Background: In 2007, as the financial system began to collapse due to the subprime mortgage crisis, the Fed cut interest rates sharply.
   Rate Hike: From 2004 to 2006, the Fed raised interest rates.
   Rates sideways and first rate cuts: rates remained at their highest levels from late 2006 to mid-2007, and rate cuts began in September 2007.
   Stock Market Reaction: The stock market remained weak after the first rate cut, and the S&P 500 fell sharply as the financial crisis began in earnest. The decline continued until early 2009, but then the stock market recovered due to the effects of the stimulus.
5. 2019-2020 COVID-19 Pandemic Response
   Background: To counter the economic shock caused by the COVID-19 pandemic, the Fed cut interest rates sharply.
   Rate Hike: From 2015 to 2018, the Fed gradually raised interest rates.
   Rates sideways and first rate cut: rates have been sideways since early 2019, and rate cuts began in July 2019.
   Stock Market Reaction: After the first rate cut, the stock market rose, but fell sharply in early 2020 as the pandemic began in earnest. Since then, the stock market has rebounded quickly due to large stimulus measures and interest rate cuts.

conclusion
Historically, the stock market was mostly mixed when interest rates were raised, followed by a sideways pace of interest rates, and when the first rate cut occurred. The stock market may rise when interest rate cuts signal an economic recovery, but it can continue to decline in the event of a recession or high economic uncertainty. In each period, the reaction of the stock market was largely dependent on economic conditions and the central bank’s policy confidence.