So Trump's been hammering the Fed about cutting rates, and honestly the stock market is probably thinking about it too. Here's what's interesting though - the data on what actually happens when rate cuts finally come is pretty compelling.

Let me break this down. The Fed's currently holding the federal funds rate at 3.5% to 3.75%, which is actually higher than what you're seeing in Canada, Europe, Japan, and most other major developed economies. Trump has made it crystal clear he wants rates much lower - he's mentioned wanting them around 1% or even below that. The thing is, when you lower the fed funds rate, borrowing gets cheaper for everyone. Businesses spend more, consumers spend more, the economy picks up steam. That usually translates to better earnings and a stronger stock market.

Here's where it gets interesting from a historical perspective. Since 1990, whenever the Fed has cut rates outside of a recession period, the S&P 500 has gone on to return a median of 11% over the following year. That's actually better than the long-term average. So theoretically, if we actually get rate cuts, there's solid historical precedent for the market responding well.

But here's the catch - and it's a big one. Inflation is still running hotter than the Fed's 2% target. We're looking at CPI around 2.4% and the Fed's preferred PCE measure at 2.9%. That's why the market was pricing in less than a 5% probability of a March rate cut based on CME data. The Fed is basically stuck between what Trump wants and what inflation data suggests they should do.

The real question now is when that first cut actually happens. Markets were looking at June as a possibility, but honestly it depends on how inflation trends over the next couple months. Until we get clearer economic signals, the stock market might just keep treading water. Everyone's waiting to see what the next fed meeting brings, and that uncertainty is probably weighing on things right now. The historical playbook says rate cuts are bullish, but first we need to actually get there.