Fed Rate Cuts: What the S&P 500 Did Next, 1990-2026
A Fed rate cut is a reduction in the Federal Reserve's target for the federal funds rate, the rate banks charge each other overnight. The Fed lists 58 cuts from Jul 1990 to Dec 2025; a year after each of the six first cuts of a cycle, the S&P 500 was up four times and down twice.
A rate cut is the Federal Reserve lowering its target for the federal funds rate. It is one of the most watched events in markets, and the question traders ask most often is simple: what did stocks do afterwards?
This page answers that from the Fed’s own list of target changes back to 1990 and the S&P 500’s daily closes, and it shows why the answer depends on what the economy was doing at the time.
How it works
The target. The federal funds rate is the rate banks charge each other for overnight loans of reserves. The Federal Open Market Committee sets a target for it, and since Dec 2008 that target has been a range a quarter of a point wide. A cut lowers the target; the central banks page covers the tools the Fed uses to keep the market rate inside it.
What a cut is meant to do. A lower policy rate feeds through to other interest rates, including loans, deposits and short-term bonds, which makes borrowing cheaper. The Fed’s statement for the 18 Sep 2024 cut, for example, gave the progress on inflation and the balance of risks as the reasons for lowering the range by half a point.
The measure used on this page. For each cut, the start is the last S&P 500 close before the date the Fed lists. The change is measured to the close 21, 63 and 252 trading days later, about one, three and twelve months. A first cut of an easing cycle is a cut whose previous listed change was an increase.
A worked example
The 18 Sep 2024 cut, listed by the Fed as 19 Sep 2024, took the target range from 5.25-5.50% to 4.75-5.00%.
- Start: the S&P 500 closed at 5,618.26 on 18 Sep 2024, the last close before the listed date.
- End: 252 trading days later, on 22 Sep 2025, it closed at 6,693.75.
- Change: 6,693.75 / 5,618.26 - 1 = 19.14%.
- Along the way, the lowest close in those 12 months was 11.31% below the start, so a year that ended well up still held a double-digit fall inside it.
The original data
110 target changes from 13 Jul 1990 to 17 Sep 2026, from the Federal Reserve Board’s tables: 58 cuts and 52 increases. Of the cuts, 36 were a quarter point, 18 half a point, 3 three quarters and 1 a full point, counting a range by its upper end.
Six of the cuts started an easing cycle. The S&P 500 after each one:
| first cut (listed date) | cycle | 3 months | 12 months | 12-month low | recession within 12 months |
|---|---|---|---|---|---|
| 6 Jul 1995 | 3 cuts, 0.75 point | +6.41% | +23.09% | +0.68% | no |
| 29 Sep 1998 | 3 cuts, 0.75 point | +16.86% | +22.27% | -8.51% | no |
| 3 Jan 2001 | 13 cuts, 5.50 points | -13.78% | -9.55% | -24.74% | yes |
| 18 Sep 2007 | 10 cuts, 5.00 points | -0.59% | -17.81% | -19.23% | yes |
| 1 Aug 2019 | 5 cuts, 2.25 points | +1.90% | +8.92% | -24.93% | yes |
| 19 Sep 2024 | 6 cuts, 1.75 points | +7.70% | +19.14% | -11.31% | no |
“Recession within 12 months” means at least one NBER recession month in the month of the cut or the 12 after it.
The base rate to compare with. From 13 Jul 1990, the S&P 500 was higher 252 trading days later on 80.6% of days, with a median change of +12.02%, and higher 63 days later on 70.4% of days, median +3.18%. Over all 56 cuts with a full year after them, it was higher a year later after 38, median +9.84%; three months later it was higher after 40 of 58 cuts, median +2.56%.
Every change, with the S&P 500 figures after it, is in the Fed rate changes file.
Cuts with and without a recession
23 of the 58 cuts came in a month the NBER counts as recession. A year after those, the S&P 500 was higher after 12 of 23, median +6.16%. After the 33 cuts outside recession months that have a full year of data, it was higher after 26, median +10.40%.
The first-cut list splits the same way. The two cycles followed by a fall, 2001 and 2007, were also the two longest, 13 and 10 cuts, and both ran through a recession. The three with no recession all ended the year up. 2019 sits between: the NBER dates a recession to Mar and Apr 2020, inside the year, and the index still finished 8.92% higher after a fall of 24.93% on the way.
How the Fed’s table records a cut
The listed date is when the new rate took effect. The Committee announced the 2024 cut on 18 Sep 2024, and the table lists it on 19 Sep. So for recent cuts the start close used here already includes the market’s reaction on announcement day.
Ranges since Dec 2008. The table lists the 16 Dec 2008 change as a 75 to 100 basis point decrease to 0-0.25%. This page measures every range by its upper end, so that change counts as 0.75 point.
The latest change was not a cut. On 16 Sep 2026 the Committee announced a quarter-point increase in the target range, from 3.50-3.75% to 3.75-4.00%, and the table lists it on 17 Sep 2026. The range had been 3.50-3.75% since the last cut of the 2024-2025 cycle, listed on 11 Dec 2025. As of 27 Sep 2026, the target range is 3.75-4.00%.
When it fails
The sample is small. Six first cuts cannot separate the effect of the cut from the economy around it, and one more cycle could change the count of ups and downs.
Averages hide the path. After the 2019 cut the index finished the year up, but its lowest close in that year was 24.93% below the start. A 12-month figure says nothing about what a holder sat through.
The timing is loose. A cut can be widely expected weeks ahead, so part of any reaction can come before the listed date and is not in these numbers. The Fed-decision how-to covers the day itself.
Recessions are dated later. The NBER sets recession dates after the fact, so the split used here was not known on the day of any cut. It explains the past spread; it was not a live signal.
Related
Interest rates covers what the policy rate feeds into, and central banks covers the institutions that set it. Recession explains the NBER dating used above, and the yield curve sets the policy rate beside longer-term Treasury yields.
Check whether a recession was under way or started soon after before quoting what stocks did after a rate cut. The average across all cuts mixes two very different groups, and the sample of first cuts is only six.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.