Rate Cuts to Energize Markets

I think this rally could be particularly powerful.

That’s because the rate-cutting cycle we are entering right now draws strong parallels to that of 1998/99, wherein tech stocks absolutely surged higher.

In the late 1990s, stocks were benefitting from the emergence of new internet technologies. Companies were investing copious amounts of cash to build new internet infrastructure and create next-gen products and services. That led internet stocks to soar on Wall Street.

Then, in the summer of 1998 the economy slowed – not by much, but enough to worry investors, cause some stock market volatility, and compel the Fed to cut interest rates. Those rate cuts re-stabilized the economy. And that only added fuel to the internet boom’s fire, causing those stocks to explode higher in 1999 and 2000. Indeed, from late 1998 to early 2000, the Nasdaq 100 rose more than 300%!

We see strong parallels to today – just with an ‘AI boom’ instead of an ‘internet’ one.

Indeed, over the past two years, stocks have been benefitting from the emergence of new AI technologies. Companies have been investing hand-over-fist to build new AI infrastructure and create next-gen products and services. AI stocks have soared on Wall Street.

Now the economy is slowing – not by much, but enough to worry investors, cause some stock market volatility, and compel the Fed to cut interest rates. Those rate cuts should re-stabilize the economy. And that should add fuel to the AI boom’s fire, causing AI stocks to explode higher into 2025 and 2026.