The Impact of the Fed's Interest Rate Cuts on the Global Economy and the Stock Market

The Federal Reserve of America (Fed) lowering interest rates is always an important event that can change the global economic landscape. Many people have different opinions: some believe that “lowering interest rates is good news that has already been fully reflected, or even bad news”; while others question “how important is the Fed lowering interest rates?” In my opinion, this is very important, and underestimating its impact is a major mistake. Let's look back at recent developments to see clearly:

1. History shows the strong impact of the Fed lowering interest rates. In 2020, when the COVID-19 pandemic broke out, global stock markets were in turmoil: the S&P 500 and Dow Jones experienced three emergency trading halts in a row, while China's A-shares fell to the 2,650 point mark. The Fed urgently lowered interest rates to near 0%, and immediately, the market rebounded strongly. America: In a short period, the stock market recovered from the “ICU” zone back to “KTV”. China: A-shares surged from 2,650 to 3,700 points within a year, creating two years of strong economic growth ( 2020–2021), allowing people and businesses to live in favorable conditions.
2. Fed raises interest rates – negative impact At the end of 2021, the Fed began tightening monetary policy, raising interest rates. As a result: A-shares dropped from a peak of 3,700 points to 2,900 points in just 4 months, and the entire interest rate hike cycle of the Fed is considered a “bear market” ( in China. It can even be said that the impact of the Fed raising interest rates has indirectly created pressure leading to international conflicts, such as Russia – Ukraine.
3. The Fed cuts interest rates again – an opportunity for the market In September 2024, when the Fed announced a rate cut, China quickly introduced several support policies. As a result: A-shares surged, increasing by more than 1,000 points within 6 trading sessions, referred to as the “924 effect.” This is clear evidence that the Fed's rate cut provides a tremendous boost to the global financial market, especially the Chinese economy.
4. Predicting the near future Currently, after 9 months of the Fed stopping interest rate cuts, the likelihood that the Fed will begin a new rate-cutting cycle is very high. China will closely follow and implement corresponding support policies. Although it is difficult to replicate the “924 effect” as in 2024, the trend of recovery from the bottom can still completely happen, similar to the developments from the end of June to the end of August this year.
5. Conclusion In the next 2–3 years, with the coordination between America's loose monetary policy and China's stimulus policies, the Chinese economy will hit bottom and begin to recover. People and businesses will have the opportunity to live better, the stock market and key economic sectors will benefit from this recovery. Overall, the Fed's interest rate cuts are not just a matter for America but have a direct impact on the global economy, especially on open economies like China. This is an opportunity that investors and businesses cannot afford to miss.