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[Interest Rate Cutting Cycle Begins: Structural Market Opportunities Emerge, and Century-Old Data Reveals Stock Market Momentum] ⑴ The market generally expects the Federal Reserve to cut its benchmark interest rate for the first time since December of last year at its monetary policy meeting ending this week, and expects this move to kick off a series of rate cuts, potentially totaling nearly six 25 basis point cuts by the end of next year. Institutional data shows that historically, the start of an easing cycle has, on average, driven stock market gains in the following year. ⑵ According to analysis by Brian Belski, Chief Investment Strategist at BMO Capital Markets, in the 10 cycles since 1982 in which the Federal Reserve began or resumed rate cuts, the S&P 500 index rose an average of 11% in the following 12 months, with gains occurring in eight of those cycles. However, he also noted that the 2001 and 2007 rate cuts coincided with recessions, resulting in declines of 13.5% and 23.9% in the subsequent 12 months, respectively. (3) Lower interest rates are expected to boost stocks tied to the domestic economic cycle, including banks, homebuilders, materials companies, and small and medium-sized enterprises, creating new leaders in the current bull market, which is dominated by mega-cap tech companies. Research by JPMorgan strategists shows that in cases where the Federal Reserve resumes rate cuts after pausing, cyclical sectors tend to outperform defensive sectors within six months after initially lagging behind. (4) Industrial and financial company stocks, high-quality cyclical stocks that have lagged behind in the recent market rebound, are likely to perform well in a lower interest rate environment. Given that the stock market has seen significant gains despite previous monetary policy tightening, with the benchmark S&P 500 index up over 12% this year and approximately 85% since the bull market began in October 2022, it remains to be seen whether rate cuts will further benefit the market.