In fact, interest rate cuts are not necessarily related to the stock market decline. If so, most cases are not falling but rising.

The fundamental purpose of the central bank's interest rate cut has nothing to do with the stock market, but to adjust the deposit and loan interest rates, and then adjust the liquidity of funds. With the change of market liquidity, it will have different effects on individuals and enterprises.

For individuals

In real life, due to the reduction of interest rates, the income of ordinary people who deposit money in banks will decrease. There are usually two kinds of people who save money in the bank. One is to pay more attention to the preservation and interest protection of bank deposits (especially after the introduction of deposit insurance system), and the other is to pay more attention to obtaining interest. Many unscrupulous people in the headlines are related to the deposit interest of which bank, so the overall interest rate cut may lead to some funds pursuing high returns flowing out of the bank. These people will certainly seek higher returns, so some of them may flow into the stock market, so cutting interest rates will bring more funds to the stock market, which will help the stock market rise.

For enterprises

First of all, cutting interest rates will reduce the financing cost of enterprises, which will naturally increase the profits of enterprises. When profits rise, financial statements will look good, fundamentals will be good, and stock prices will generally rise.

Secondly, the loan cost is low, and enterprises are willing to raise funds to expand production scale. When the enterprise develops well, the stock price will naturally rise.

Finally, with the rising share price of listed companies, the whole stock market will definitely get better and better.

Historical situation

Judging from the performance of the stock market after interest rate cuts in recent years, the stock index rose more and fell less the next day, indicating that interest rate cuts are a stimulating positive for the stock market.

Of course, the most fundamental factor affecting the stock market is economic development, and interest rate cuts are only temporary.