Half of Investors Believe Fed’s Interest Rate Cut Was a Mistake

In this week’s Sentiment Survey special question, we asked AAII members what they thought about the Federal Reserve’s decision to cut interest rates by 50 basis points (0.50%). Of the responses we received, 50% state that the Fed’s decision to cut interest rates was a mistake. Rationale from this group includes lack of “future Fed ammunition” if and when the market deteriorates further, as well as rate cuts being ineffective against ongoing macro events (aka, COVID-19). Alternatively, 27% of respondents state that they support the Fed’s decision to cut rates. Many within this group believe that it was the only viable option that the Fed had to combat the recent market volatility. Finally, 17% of respondents state that the rate cut will have little effect on the market and 6% of respondents state that they are unsure if the Fed made the right decision. Among these respondents, reasoning includes that the rate cut was initiated too late in response to the COVID-19 outbreaks.

Here is a sampling of the responses: 

• “Not the best idea. Indicated to investors their concern about a recession. Now they have little leverage to help.”
• “Although it was the right thing to do, it will make little difference to the economy in the near term.”
• “I believe it was premature and indicated lack of faith in the underlying strength of the economy. As such, it was a bearish signal and likely contributed to the debacle that occurred on March 9.”
• “I haven’t given it much thought yet. I can understand the reasoning behind it, but with the market being volatile and unpredictable, the expected results don’t always go as planned.”

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