18 September 2007: The Fed cuts rates by half a point
With credit markets seizing up over subprime mortgages, the Federal Reserve cut its benchmark rate by half a percentage point to 4.75 percent, more than many expected. The Dow jumped more than 300 points. It looked like the Fed had rescued the market, and stocks hit new highs within weeks. But the deeper problems remained, and the financial crisis was still ahead.
The lesson: A rate cut can lift stocks briefly, but it cannot fix fundamental problems in the financial system.
What it meant for investors
$1,000 in S&P 500 index fund at the start of 2007 → $4,789 today, vs $4,789 in the S&P 500.
We start the clock at the start of 2007, the year it happened. That is 4.8 times the money, but $0 less than a plain index fund made over the same years.
What S&P 500 index fund teaches: Owning the whole market removes the risk of picking the wrong company but not the risk of a lost decade, so time horizon matters as much as diversification.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2007 | $1,420 | $4,789 | $4,789 |
| 2008 | $1,470 | $4,626 | $4,626 |
| 2010 | $1,120 | $6,071 | $6,071 |
green = beat the S&P 500 · red = lost money
What if you bought S&P 500 index fund? Every starting year and the full story →
More S&P 500 index fund history
- 5 February 2018: Volmageddon: the Dow drops 1,175 points
- 19 February 2020: The S&P 500 hits a record before COVID
- 29 February 2020: The US reports its first COVID-19 death
- 3 March 2020: The Fed makes an emergency rate cut
- 6 March 2009: The S&P 500 touches 666
- 9 March 2009: The bear market bottoms
Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
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