Legendary Trader John Bollinger Speaks Out on Fed Rate Cut

The Federal Reserve recently made a notable decision by reducing the Fed rate by 50 basis points. Policymakers cited ongoing economic growth, despite slower job creation and a slight uptick in the unemployment rate. Although inflation remains above its target, it is gradually approaching the Fed’s 2% goal.

Following this significant rate cut, markets reacted positively, particularly within the cryptocurrency sector. Investors are keenly observing the Fed’s upcoming moves as the central bank evaluates economic data and potential risks before making any further interest rate adjustments.

Prominent financial analyst John Bollinger, known for developing the Bollinger Bands trading indicator, commented on the rate cut. He emphasized that these adjustments should be seen as a return to normal rather than merely a relaxation of monetary policy.

### What’s next?

On one hand, it seems reasonable to conclude that, following this adjustment, there should be no compelling reason for a decline in the market. Excluding geopolitical factors, which are always unpredictable, the primary concern is with the Nasdaq and the S&P 500, which have yet to experience a typical correction. If investors decide to take profits from blue-chip stocks, a significant drop could occur.

Federal Reserve Chair Jerome Powell was asked directly about the possibility of a recession, which often follows a period of rate cuts. He responded clearly, indicating that there are currently no signs pointing to a recession.

On the other hand, historical data shows that the average maximum drawdown for the S&P 500 one year after the Fed initiates a rapid contraction cycle is -20.7%. In contrast, the average maximum drawdown one year after a gradual contraction cycle starts is -7.4%.