Comparative Analysis: S&P 500 & Federal Funds Rate 1998 vs 2024
A Comparative Analysis: S&P 500 
SPX and Federal Funds Rate - 1998 vs. 2024
Historical Context:
(the lower chart S&P 500 and federal funds rate development 1994-2004)
1998:
- On September 29, the Federal Reserve began lowering the federal funds rate from 5.5% to 5.25%
- The interest cuts fueled the tech bubble, leading to a sharp rise in the S&P 500 over the next two years
- By 1999, as the Fed started increasing rates again, this contributed to the bursting of the tech bubble in 2000
Current Scenario:
(the upper chart S&P 500 and federal funds rate development 2020-2030)
2024:
- The federal funds rate now stands between 5.25-5.5%
- Anticipation is high for a rate cut on September 18, possibly by 25 or 50 basis points, mirroring the scenario of 1998
- Today, instead of a tech bubble, we're witnessing the emergence of an AI bubble
Future Speculations:
- AI Bubble Expansion: With the FED potentially lowering rates, this could accelerate the AI bubble, propelling the S&P 500 to new heights over the next 1-2 years
- Inflation Concerns: Lower interest rates might reignite inflation by 2025. If history repeats, the Fed might then hike rates again, risking a burst of the AI bubble post-2025
Conclusion:
While this analysis draws parallels with historical data, it remains speculative
However, the pattern aligns with economic cycles, particularly the 18-year property cycle and the broader economic super cycle that began in 2008
-> Do you think this scenario is realistic?
SPX and Federal Funds Rate - 1998 vs. 2024Historical Context:
(the lower chart S&P 500 and federal funds rate development 1994-2004)
1998:
- On September 29, the Federal Reserve began lowering the federal funds rate from 5.5% to 5.25%
- The interest cuts fueled the tech bubble, leading to a sharp rise in the S&P 500 over the next two years
- By 1999, as the Fed started increasing rates again, this contributed to the bursting of the tech bubble in 2000
Current Scenario:
(the upper chart S&P 500 and federal funds rate development 2020-2030)
2024:
- The federal funds rate now stands between 5.25-5.5%
- Anticipation is high for a rate cut on September 18, possibly by 25 or 50 basis points, mirroring the scenario of 1998
- Today, instead of a tech bubble, we're witnessing the emergence of an AI bubble
Future Speculations:
- AI Bubble Expansion: With the FED potentially lowering rates, this could accelerate the AI bubble, propelling the S&P 500 to new heights over the next 1-2 years
- Inflation Concerns: Lower interest rates might reignite inflation by 2025. If history repeats, the Fed might then hike rates again, risking a burst of the AI bubble post-2025
Conclusion:
While this analysis draws parallels with historical data, it remains speculative
However, the pattern aligns with economic cycles, particularly the 18-year property cycle and the broader economic super cycle that began in 2008
-> Do you think this scenario is realistic?
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