Stocks Fall When The Fed Starts Cutting Rates, Says History | Danielle Park

Expect a painful correction for stocks once the Fed truly pivots

When today's guest appeared for the first time on this channel a few months ago, a start was born.

Those who hadn't yet heard of Danielle Park were impressed by both her command of the macro data and her unflinching courage to call things as she sees them.

She highlighted a number of concerns about the trajectory of the economy and markets back then -- and today we check back in with her to see whether things have improved...or gotten worse?

Well, Danielle thinks they're "worse".

Stress cracks in the economy are now much more clearly visible.

And the markets?

While they're currently being driven to new highs by "madness" (see: Gamestop), investors hoping for rate cuts may indeed get them. But history shows that stocks fall, often hard, during rate cut regimes.

So investors better be careful what they wish for. And they'd better be prepared.

Too many are too long and too confident right now.

To learn how Danielle is positioning client capital given her outlook, click here or on the image below:

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Adam’s Notes: Danielle Park (recorded 5.14.24)

EXECUTIVE SUMMARY:

• Danielle sees the system as regressing away from health, noting the economy is showing increasing signs of stress while the exuberant market action is “madness”

• In her assessment, the market's volatility and speculative behavior, such as increasing use of 0-dated options, double-leveraged ETFs and the resurgence of meme stocks, reflects underlying desperation to keep prices elevated at all costs, despite the underlying fundamentals. It’s not sustainable.

• Many central banks are cutting rates due to declining demand and consumption, showing that Lag Effects are already arriving around the world. Though the U.S. benefits uniquely from being able to deficit spend using the world’s reserve currency and sell its debt, unlike many other struggling nations, so while the Lag Effect will arrive on its shores, too, it’s taking longer.

• Danielle sees recession as very likely, with high debt levels and inadequate cash reserves making people vulnerable. She worries that, as in past large corrections, the majority of investors will be poorly-positioned when it arrives. Too many people are too long and too confident right now.

• Even those who think they are sufficiently diversified may have less protection than they realize. For example,