Why “No Rate Cuts” from the Fed Might Actually Benefit U.S. Stocks and Crypto in the Long Run
- Jenna Ryan
- Aug 2
- 3 min read
1. High Interest Rates ≠ Bear Market: History Shows Bull Markets Often Thrive in Tight Monetary Environments
From 1994 to 2000, the Fed raised the federal funds rate from around 3% to 6%. Surprisingly, this period led to one of the most powerful tech bull markets in history:
The S&P 500 soared from ~470 points to 1,500 by 2000.
The Nasdaq delivered an annualized return of over 25% from 1995–2000, preceding the dot-com boom.
Corporate earnings, innovation, and ROI—not loose monetary policy—were key drivers.
Key takeaway: As long as the economy avoids a hard landing, high interest rates alone do not suppress stock markets.
2. “No Cuts” Signals Economic Confidence, Not A Policy Mistake
As of July 2025, the Fed’s target rate is 4.25%–4.50%—neither eased nor further hiked.
This reflects a soft landing in progress:
Core PCE inflation dropped from 5.4% (2022) to ~2.6%-2.7% in mid-2025.
GDP growth stabilized between 1.5%–3% annualized.
Unemployment remains low at 4.1%; labor market is resilient.
S&P 500 EPS forecast: $250–265 for 2025, showing earnings recovery.
Interpretation: The Fed is stepping back—not because it’s indifferent, but because the market is self-healing.
3. Real “Easing” Now Comes from Fiscal Stimulus, Not Monetary Policy
Key stats:
Fiscal deficit > 6.4% of GDP in 2024, one of the highest post-WWII.
Total federal debt exceeds $36.7 trillion as of July 2025.
Q3 2025 Treasury issuance expected to exceed $1 trillion.
The “Big Beautiful Bill” (pushed by Trump allies) adds ~$3 trillion in deficit over 10 years via tax cuts and subsidies.
This fiscal expansion is effectively liquidity injection, despite steady interest rates.
4. High Rates Strengthen Market Structure: “Survival of the Fittest”
High rates hurt small firms but benefit giants:
Apple holds over $130B cash, Alphabet ~$90B, Meta ~$70B.
At 4%-5% rates, these cash reserves generate billions in interest income.
Small firms are squeezed out, market share flows to giants.
Stock buybacks enhance EPS, stabilizing valuations.
Result: The “Magnificent Seven” dominate indexes, driving market highs despite elevated rates.
5. Crypto: Transitioning from Speculation to Structural Allocation
Crypto is maturing into a cash flow-driven asset class:
1) ETH/BTC: Digital Yield + Digital Gold
ETH staking yields: 3.5%-4.5%, akin to Treasuries.
BTC is adopted as reserve asset (e.g., MicroStrategy).
ETH offers yield + scarcity via ETFs, restaking, and governance income.
2) Stablecoins: Yield Arbitrage Profits
Circle earned $1.7B profit in 2024 via Treasury yield.
Tether made $4B+ from reserve investments.
High rates enhance DeFi infrastructure stability.
3) Crypto Valuation Shifts to Cash Flow & Systematic Yield
Altcoins & memes are fading.
Capital shifts to cash-generating projects like Uniswap, EigenLayer, Lido.
Metrics like ROE, cash flow, inflation resistance now drive crypto valuations.
Crypto’s evolution: From hype to structural asset allocation.
Conclusion: This Is an Asset Repricing Cycle, Not a Return to “Easy Money”
Rate cuts can fuel price surges, but without real earnings and structural improvements, bubbles pop—as seen post-2021.
Today’s markets offer a healthier path:
High rates + controlled inflation.
Fiscal stimulus + corporate earnings recovery.
Strong firms dominate with cash advantages.
Crypto focuses on sustainable models.
The Fed’s “inaction” is the catalyst for this structural repricing—a slow, durable bull market built on fundamentals, not just liquidity.
Disclaimer: This is not financial advice. Please comply with local laws.
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