How The Fed Impacts The Stock Market

The Macro Institute's Weekly Economic Primer

Author

The Macro Institute
February 09, 2026

In partnership with

(If you’re enjoying the videos, we would really appreciate it if you could take a second to “Like” it on YouTube. It helps our content reach more and more people! Thank you!)

Don’t have time to watch the whole video? Here’s 5 Key Takeaways:

🔹 Monetary Policy Occurs In A Cycle: After the Fed cuts rates, LEIs tend to rise 12-18 months later. This is followed by a rebound in earnings, acceleration in GDP, employment market improvements, and finally, higher inflation. Eventually, the Fed must hike rates to fight inflation, and the reverse occurs.

🔹 The Fed Has Control Over Short-Term Rates: Short-term rates such as the 3-month yield or 2-year yield are tightly correlated with the fed funds rate. This means they can be used as a proxy of Fed policy for forecasting purposes.

🔹 The Fed Has Less Control Over Long-Term Rates: The relationship between long-term rates and the fed funds rate is more complicated. There is a correlation, but long-term rates are affected by many external factors outside the Fed’s purview.

🔹 Equity Performance Around Cuts & Hikes: Despite the politicization of rate cuts, equity performance following previous cuts is a mixed bag, averaging +1% following the start of the last five cutting cycles. On the contrary, performance before and after rate hikes tends to be quite strong.

🔹 Stocks Like Fed Chair Nominations: Equities moved higher following the nomination of the last five Fed chairs. One possible explanation is that the market hates uncertainty, and knowing who is going to be in charge of the Fed brings clarity.

Miss our last few videos? No worries. Check them out below 👇

Learn Macro Investing From A Legend

Want to learn the exact Macro Investing framework that Francois Trahan has used over his 30+ year career on Wall Street?

Well, we have good news.

We condensed his framework into an online 15-hour Macro Investing Bootcamp.

It’s completely self-paced, designed to fit into your schedule, and offers video lectures by Francois, downloadable slides, key takeaways, and practical exercises. 

You’ll learn the essentials of macro investing: the forces of policy, the global backdrop, and how macro trends affect stock selection and portfolio strategy.

Macro Data Center

The Macro Week Ahead

📆 Last Week’s Data Key Takeaways

🔹 Manufacturing Surged Back Into Expansion: The ISM Manufacturing Index jumped 4.7 points to 52.6 in January, which is its first time in expansion in 12 months, and well above the consensus of 48.5. The New Orders Index surged 9.7 points to 57.1, its highest level since February of 2022.

🔹 The Labor Market Is Showing Cracks: The JOLTS report revealed job openings plunged 386,000 to 6.5 million in December, well below the 7.2 million forecast. Initial jobless claims spiked 22,000 to 231,000, which was the biggest jump in two months, and calls into question the second half of “No Hire, No Fire.”

🔹 January Jobs Report Was Delayed By Government Shutdown: The BLS confirmed that the January Employment Situation report, originally scheduled for Friday of last week, was postponed due to the partial government shutdown. It has been rescheduled for this Wednesday February 11.

🔹 Consumer Sentiment Improved & Inflation Expectations Fell: The University of Michigan's preliminary February Consumer Sentiment Index rose to 57.3, beating the 55.0 forecast and reaching its highest level since August 2025. Year-ahead inflation expectations dropped to 3.5% from 4.0%, the lowest since January 2025.

🔹 Consumer Credit Accelerated: Total consumer credit increased at a 5.7% seasonally adjusted annual rate in December, a notable acceleration from the 1.0% pace in November. For all of 2025, consumer credit rose 2.4%.

Better prompts. Better AI output.

AI gets smarter when your input is complete. Wispr Flow helps you think out loud and capture full context by voice, then turns that speech into a clean, structured prompt you can paste into ChatGPT, Claude, or any assistant. No more chopping up thoughts into typed paragraphs. Preserve constraints, examples, edge cases, and tone by speaking them once. The result is faster iteration, more precise outputs, and less time re-prompting. Try Wispr Flow for AI or see a 30-second demo.

Macro Job Board

Analysts will closely monitor political and policy developments, assist in publishing timely and innovative research on macroeconomic, political, and policy developments, and work with colleagues in sales and trading and investment banking, as well as clients, to answer questions and explain the team's views.

The Associate will work on a lean team to develop forward-looking investment views across global corporate credit markets, including private credit, leveraged loans, high yield, and investment grade. Must independently generate research ideas, translate complex market dynamics into insights, and deliver high-quality written content.

This role will work closely with the Senior Portfolio Manager to develop systematic macro strategies, focusing on alpha research, including idea generation, data preprocessing, statistical analysis, back testing and implementation. Must independently explore and develop new alpha ideas while collaborating in a team oriented environment.

What We Read This Weekend