What History Says About the Next Rate Move

Economic Context - The unemployment rate has shown a consistent decline following rate cuts, similar to trends observed in 1998 and 2019, with the latter seeing unemployment at a 50-year low of 3.7% [2][4] - The Federal Reserve has historically implemented rate cuts as a "risk management" measure when unemployment is below 4.6%, specifically in 1998 and 2019 [4] Federal Reserve Actions - The Fed's recent rate cuts in September and October 2025 align with historical patterns of "risk management" adjustments, raising questions about a potential third cut in December 2025 [6] - Fed Chair Jerome Powell indicated that the recent rate cuts were a response to emerging weaknesses in the labor market, despite a relatively healthy unemployment rate of 4.3% in August 2025 [5] Market Reactions - Following the initial rate cuts in 2019, the S&P 500 experienced a significant recovery, surpassing previous highs by mid-December after a nearly 20% drawdown prior to the first cut [2] - Treasury yields showed resilience, falling ahead of the first two cuts and stabilizing or steepening afterward, indicating a complex relationship between rate cuts and market performance [3][4]