Jerome Powell and the Federal Reserve just predicted interest rate cuts in 2024. These predictions have caused the markets to go crazy: with long-term bond yields plummeting and the stock market surging.

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However, what many market participants are missing is that historically, Fed Rate Cuts are BAD NEWS for the economy. With every large spike in unemployment in America over the last 70 years being directly preceded by Fed Rate Cuts. Generally, the Fed cuts rates because it is seeing weakness in the overall economy.

Just like they did in September 2007. The Fed at the time cut interest rates due to a weakening economy and the Stock Market surged as a result. With many believing the the rate cuts would "save" the economy from distress. One year later Lehman Brothers occurred and the unemployment rate skyrocketed.

Of course - history isn't guaranteed to repeat itself. Theoretically - the economy could still hit a soft landing, with home prices and stock prices continuing to increase. However, it's hard to see how this occurs when looking at the fundamentals, with personal savings rates in America very low, indicating a stretched consumer. Meanwhile, there's $73 Trillion in outstanding debt in America between government, corporations, and households.

That debt will need to be refinanced in future years at interest rates much higher than the debt was taken out at. Even if the Fed does cut rates substantially. Likely slowing economic growth and causing problems in the economy.

Meanwhile - the Fed signals for rate cuts have already caused Mortgage Rates to drop significantly, falling from a high of 8.0% to 6.6% today. This drop in mortgage rates will likely bring more buyers back into the market, but thus far, the data is showing relatively little traction in housing demand.

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