But what does Mike Wilson think? “Where is Ja?!” (Somebody will get it.)

Credit where it’s due: Staying alive — to say nothing of getting yourself on the right side of the trade without abandoning your principles — is difficult for stalwart skeptics during incorrigible equity melt-ups. The nine-month stock rally from the local lows in October of 2023 to the high water mark for the S&P in July certainly counted as an incorrigible melt-up. And Wilson’s a stalwart skeptic. He’s still alive. And he found a way to get on the right side of things this year. Good for you, Mike.

That said, I think it’s probably fair to suggest that given the idiosyncratic character of the current cycle, strategists whose claim to expertise rests on knowledge of past cycles are in a tough spot. Just ask Wilson’s counterpart at Goldman. “History may not be the most useful guide for the forward path of equities today,” wrote David Kostin, who stayed on the right side of the market these past four years the old fashioned way: By raising his index price target the higher stocks went. Kostin continued: “For equities, the unique nature of this cutting cycle raises questions about the usefulness of historical precedent.”

On the off chance history at least still “rhymes,” the table below, from Wilson, shows you the history of S&P returns at different points post-first cut.

“Returns tend to be mixed,” Wilson offered, adding that “value tends to outperform into the cut and underperform growth post-the cut [while] defensives tend to outperform cyclicals fairly persistently both before and after the cut.”

From a 30,000-foot macro view, the fate of the S&P following the onset of Fed easing cycles depends on the trajectory of the economy. (Imagine that.) Or at least that’s been the case since the 80s.

“During the five cutting cycles since 1984 where the economy did not quickly enter a recession, the S&P typically returned +6% during the three months, +9% during the six months and +17% during the 12 months after the first Fed cut,” Kostin wrote, in the same note mentioned above. “Earnings drove most of these gains, with equity valuations expanding in only three of the five episodes.”

The figure above is straightforward: If recession, bad; if no recession good. (This is why they make 7x a school teacher’s salary. It’s good work if you can get it.)

Wilson and Kostin agree on one thing: It’s about growth from here. “While some investors believe the speed of Fed cuts will be the key determinant of equity returns in coming months, the trajectory of growth is ultimately the most important driver for stocks,” Kostin wrote.

“In our view, the labor/growth data will be much more important to how stocks ultimately trade over the next 3-6 months than the magnitude of this week’s rate cut,” Wilson remarked.

Finally, I think it’s worth mentioning the four scenarios Morgan Stanley’s rates team posited for this week’s FOMC meeting. They’re excerpted below, and presented without further comment.

• 25bps cut, unanimous with no dots below 4.625%: Bullish for risky assets because FOMC participants have conviction that the economy did not require a 50bps cut.
• 25bps cut, a number of dissents or dots below 4.625%: Bearish for risky assets because the economy might need a 50bps cut, but it didn’t get one.
• 50bps cut, a number of dissents or dots above 4.625%: Bullish for risky assets because the economy might not have needed a 50bps cut, but it got one anyway.
• 50bps cut, unanimous with no dots above 4.625%: Bearish for risky assets because FOMC participants have conviction that the economy needed a 50bps cut.