Citigroup Recap Period: Historical Pattern around First Rate Cut - US Stocks and Bonds Rise Together, Gold Initially Strengthens and then Plateaus

September 17th. According to Citigroup Research, historical data indicates that during the period around the first rate cut, the median performance of US stocks and bonds has been positive. Historically, stocks have witnessed a median increase of approximately 5% within 50 days following a rate cut. However, there is a downside risk in the event of a hard landing scenario. Bonds have also reaped the benefits of rate cut expectations and actual cuts, with yields typically reaching a low around the time of the first cut. The US Dollar Index has demonstrated a pattern of "weakness first and then sideways". It usually weakens prior to a rate cut and then enters a period of range-bound trading after the cut. Precious metals such as gold have shown a similar trend of rising before the onset of loose monetary policy. Nevertheless, their performance tends to flatten after actual rate cuts, resulting in a more range-bound trading pattern. Citigroup analysts stated that these historical patterns were generally validated in 2024. However, bond prices reached their peak around the time of the first rate cut. At that time, the market had overly priced in rate cuts. In contrast, the current cycle's pricing has been relatively moderate, which has alleviated concerns about the outlook for bonds. (Wall Street News)