Overseas strategy: US Federal Reserve cuts interest rates, how will asset prices evolve?

Guotai Haitong released a research report stating that the rate cut by the Federal Reserve will significantly affect the trends of stocks, bonds, and currencies, while the trend of commodities is not clear. The success rate of equities typically increases one month after a preventive rate cut, and after a rate cut, US bond rates usually decrease. 1) Stocks: The success rate of equity assets is higher during a preventive rate cut period, while performance during a relief rate cut period depends on the repair of fundamentals, with A-shares showing some independence. 2) Bonds: US bond rates are more likely to decrease during a relief rate cut, with an uncertain trend after a preventive rate cut. Most often, Chinese bond rates decrease after a rate cut, while European and Japanese bond rates do not show a clear pattern. 3) Exchange rates: Initially after a rate cut, the direction of the US dollar is uncertain. However, 2-3 months after a rate cut, the US dollar tends to depreciate during a relief rate cut and appreciate during a preventive rate cut, with the Chinese RMB showing relative independence. 4) Commodities: The success rate of gold is higher during a preventive rate cut, with a greater potential for price hikes during a relief rate cut, while the trend of oil prices is not significantly related to rate cuts and is easily influenced by supply and demand factors. Since 1982, the Federal Reserve has conducted 4 relief rate cuts and 6 preventive rate cuts. Relief rate cuts are typically performed after regional or global crises, such as the bursting of the dot-com bubble in 2001 and the financial crisis in 2008. The main difference between these two types of rate cuts is whether the US economy has entered a recession at the time of the rate cut. Relief rate cuts are often associated with larger rate cuts and longer durations, while preventive rate cuts occur during periods of economic slowdown with various triggers, smaller rate cuts, and shorter durations. The trends of stocks, bonds, and currencies are significantly affected by rate cuts by the Federal Reserve, while the relationship between commodity prices and rate cuts is not obvious. Observing the performance of various asset classes during 10 complete rate cut cycles, it can be seen that: 1) Equity assets typically have a higher success rate during a preventive rate cut period and a high probability of decline during a relief rate cut period. 2) US bond rates are more likely to decrease during a relief rate cut period, while the trend after a preventive rate cut is uncertain. 3) During rate cuts, the direction of the US dollar is variable, with the Chinese RMB showing independence, and the Japanese yen and the Euro showing average appreciation. 4) The relationship between commodity prices and rate cuts is weak, with gold showing higher average price increases during a relief rate cut period. The success rate of equities typically increases one month after a preventive rate cut, and after a rate cut, US bond rates usually decrease. Furthermore, reviewing the trends of various asset classes in the first 30/60/90/120/150/180 days after the first rate cut during 10 rate cut cycles, it can be observed that: 1) Equities: The success rate typically increases one month after a preventive rate cut, while the performance during a relief rate cut is related to fundamental repairs. 2) Bonds: After a rate cut, US bond rates usually decrease, with Chinese bond rates showing a short-term decline, and German/Japanese bonds showing no clear pattern. 3) Exchange rates: The US dollar shows uncertain trends initially after a rate cut, and after 2-3 months, the trends differ between preventive and relief rate cuts. 4) Commodities: The potential for gold price increases is greater after a relief rate cut, while the trend of oil prices is not significantly related to rate cuts.