Past performance may be no guide to future results. Still, there is something about impending US rate cuts that compels investors to pull out their almanacs and adages. These suggest that most asset classes should benefit if easier monetary policy boosts the US economy — as rallying US stocks and bonds seem to expect. The dollar’s weakness, though, provides a potential twist. 

Investors are confident the Federal Reserve will on Wednesday cut interest rates for the first time since December, easing by a quarter-point. Futures contracts indicate that roughly 0.75 percentage points of further easing are expected over the next six months. Stocks have already factored in a lot of this: the S&P 500 has hit a series of record highs and hasn’t ended any week significantly lower since late July. 

Traditionally, when the Fed resumes easing after several months on hold and manages to stave off a downturn, the S&P 500 rises strongly: over the past 40 years, the median gain a year after the first cut is roughly 15 per cent, according to Goldman Sachs. Traditional underperformers include banks, whose margins suffer when rates fall, and insurers, whose returns do likewise. Winners include classic defensives such as utilities and telecoms.