>>20941516Rate cuts because inflation is coming down, while employment stays strong is bullish
Rate cuts because inflation is comign down, while employment weakens is bearish
In other words, cutting for good reasons, vs cutting for bad reasons
It also matters the rate at which they are cut
If the Fed were to cut by 50bps (compared to 25) this signals that the Fed is uncertain about the economy, and is behind the curve in lowering interest rates to prevent a recession / make a recession less severe
You also need to remember that inflation can be bullish for stock prices - companies raise their prices, their earnings increase - equities are seen as an inflation hedge
The key concept in all of this, at the most basic level, is this chart
>pic relatedThe Fed is not able to increase supply, they can only influence demand - this has been their mission all along, to reduce demand
Note that with decreased demand you both have lower prices as well as lower quantity demanded
In other words.. revenues fall
When demand falls, it snowballs - because a company isn't getting new orders, they lay off some of their employees, these employees are now no longer consuming goods & services at the same rate as before, so now another company reduces their payroll
