After nine months of unchanged policy rates, the US Federal Reserve (Fed) cut by 25bps this September. Most market participants expect multiple rate reductions over the coming months. To put the Fed’s decision into context, we looked back at the impact of easing cycles on the treasury yield curve, the S&P 500 and emerging market assets since 1980.

In our view, the patterns observed offer useful guidance as to what to expect from here. For investors, the crucial question is whether this cut is the first of a recessionary easing cycle, or one of (potentially) multiple ‘insurance’ cuts. This distinction has historically characterised the relative performance of equities, credit, and emerging market (EM) assets, as well as the dynamics of the US yield curve.