As the Federal Reserve embarked on the second year of its rate-cutting cycle after its last cut in September 2024, historical data points to potentially significant gains for the S&P 500, with an average return of over 16% in the second year following initial cuts.
S&P 500 Poised To Soar In Absence Of Recession
However, a crucial caveat remains: these robust returns are contingent on the U.S. economy successfully sidestepping a recession.
According to Jeff Buchbinder, Chief Equity Strategist at LPL Financial, “Year two of rate-cutting cycles has historically delivered solid gains for stocks — provided the economy avoids recession.”
The first year of the current cycle, which commenced with a half-point cut on Sept. 18, last year, saw the S&P 500 deliver a strong return of over 17% for the whole year till Sept. 18, 2025. This surpassed the historical average gain of 9.6% for year one.
The Fed cut its target federal funds rate by another quarter point on Wednesday, marking a continuation of its easing policy.
What Does The S&P 500’s Historical Performance Tell Us?
Historical analysis over the past 50 …