What interest rate cut really mean for the Australian stock market
The Reserve Bank of Australia today cut the official cash rate from 4.5 per cent to 4.25 per cent at its final meeting for 2011. This is 13′ th interest rate cut decision since Feb 2001. It may be wise, as a stock market short term trader , to be aware of the potential effects behind such interest rate cuts. Below, we will examine how the past interest rate cut decisions affected the Australian stock markets going back to 2001. As shown below, 9 out of the 12 months “All Ordinaries Index”, had a negative monthly returns when the interests rates are cut. The average monthly loss during during such decision stands at -3.12 % the median is at -4.62%.
For those interested, 7 out of the 12 months “All Ordinaries Index” had a negative returns for the the remainder of the month as well , with the average loss for the rest of the month standing at -3.37% .
