A rate cut out of the blue was a stupid thing to do. The Fed needed to communicate that is was considering this or something similar. All it has done now is spook the market into thinking things a worse than they thought (to need a 1/2 point cut).
Damned if they do, damned if they don't. The reason we are seeing a slight dip today is because the rate cut was expected to happen. After the G7 emergency meeting we saw an uptick this morning. Then the announcement happened and you see it pull back slightly. This whole thing is frustrating to me.
Two things to consider here:
1. I seem to recall a certain Twitterer in Chief complaining about low rates a while ago so a rate cut only goes against everything he was concerned with. Not only that, but IF the economy is the strongest it's ever been, there's no need to cut rates.
2. By cutting rates, the Fed just wasted ammo on something it still has no evidence to have acted on. Cutting the rate to 1.25% only gives the Fed about more 5 cuts to attempt to stimulate the economy IF the effects of the Coronavirus are worse than expected (the Fed has never entered negative rates and such a move would be unprecedented in the US). Yes, the cut was expected to happen, but not at an emergency meeting and likely not 0.5%. So I agree with Tugger in that if you needed to cut 0.5%, then
-the economy is not in the best shape
-you're expecting worse things to come.
Oh, and the uptick actually came AFTER the rate cut. The markets in the US opened in the red BECAUSE nothing encouraging came out of the G7 meeting. News of the rate cut put the market briefly in the green and, as I write this, the Dow is down over 700 points.