Will the rate cut fail to boost US stocks, and will the S&P 500 index fall another 20%?

According to David Rosenberg, a senior Wall Street figure, stock market investors may hope that the Fed will soon pause its rate hikes and cut rates before the end of the year, but history shows that this shift does not guarantee a stock market rally.

Rosenberg pointed out that of the 14 rate hike cycles since 1950, 11 ended in recession.

A report released by Rosenberg on Wednesday showed that historically, the average time from the peak of the S&P 500 index to the beginning of a recession is about six and a half months.

The S&P 500 index typically takes 12 and a half months from peak to trough, which usually occurs before the end of a recession.

When will the Fed cut rates?

Rosenberg wrote: "The Fed may raise rates next week to appease the hawks on the FOMC."

He expects the Fed to start cutting rates in the fourth quarter, marking the beginning of an easing cycle.

Rosenberg said the easing cycle could be a big one.

"Based on historical data, the Fed tends to cut rates by about 75 basis points during a soft landing or economic slowdown that does not evolve into a full-blown recession," he said.

But in a recession, Rosenberg pointed out, "the Fed tends to cut the benchmark interest rate by 500 basis points, or completely reverse the previous tightening cycle."

Will US stocks fall another 20%?

Rosenberg believes that the S&P 500 index may fall another 20% before hitting bottom.

Rosenberg said, "The bear market bottom in fundamentals requires a more convincing level of stock risk premium expansion to +425 basis points, or more than twice the current level." The stock risk premium refers to the difference between estimated actual returns on stocks and government bonds.

"Taking all these factors into account, the S&P 500 index will approach 3200 points, and the 10-year US Treasury yield will fall to at least 2.5%," Rosenberg said.