Is a rate cut a good thing or a bad thing?

1. Bank interest rate cuts refer to bank interest rate adjustments, changing the liquidity of funds;

2. Interest rate cuts lead to lower interest rates on deposits and lower interest rates on loans. People do not want to People are willing to deposit money in banks, and the number of loans will increase, and the liquidity of funds will increase significantly. When people have money, they will consider the stock market. To a certain extent, this is good, but this good will not come too soon. Obviously, the assessment of interest rate cuts every year is very strict in order not to overwhelm the situation.

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An interest rate cut means a reduction in the income from funds deposited in banks. So will an interest rate cut affect stocks? Let’s talk about the impact of an interest rate cut on stocks.

Interest rate cuts mean that the central bank lowers interest rates, which will inhibit bank savings. Since interest rate cuts are price tools, they will appropriately encourage upward inflation, which will lead to the outflow of bank deposits into investment and consumption. Will increase market liquidity. Generally speaking, lowering interest rates is beneficial to the rise of the stock market.

Introduction to the method

01 An interest rate cut means the central bank lowers interest rates, which will inhibit bank deposits. Since the interest rate cut is a price tool, it will appropriately encourage upward inflation, which will guide bank deposits. Outflows into investment and consumption will increase market liquidity. Since interest rate cuts encourage funds to shift from deposits to investments, lower interest rates are generally beneficial to stock market gains.

02 However, it cannot be generalized. The early stage of interest rate cuts has little impact on the overall trend of the stock market, and most of them are short-term effects. However, when interest rates are cut several times, the liquidity of the market changes from quantitative to qualitative changes, often It will play a positive role in the rise of the stock market.

Interest rate cuts have a greater impact on bank stocks. If the interest rate cut cycle is long, it will affect the increase in bank deposits, which will limit the credit scale of the banking industry and affect the performance of bank stocks to a certain extent. However, since interest rate cuts directly benefit high-indebted industries and help banks alleviate debt pressure, it is generally a major benefit to bank stocks. Industries such as real estate, infrastructure, nonferrous metals, and coal that are closely related to debt issues will also be the first to benefit.

03 It is bullish for stocks such as real estate, precious metals and resources, because interest rate cuts will encourage price increases. To hedge against inflation and other factors, residents will maintain value by investing in real estate, precious metals, etc., while large capital tends to Active investment uses scarce resources, precious metals and energy to hedge against inflation, so stocks in this category are prone to rise due to positive influences.

04 Interest rate cuts will also stimulate consumption, so they are conducive to the rise of consumer stocks. Consumer stocks generally refer to the stocks of listed companies whose main business is the production and sales of daily consumer products, involving commercial chains, Stocks such as retail, food, brewing, beverages, hotels, tourism, home appliances, clothing, etc.

05 Generally speaking, interest rate cuts have a generally positive effect on the stock market, because interest rate cuts have medium- and long-term market guidance significance, so they are beneficial to the medium- and long-term development of the stock market.