Bybit TradFi Report: Will the market decline after an upcoming Fed rate cut?

Federal Reserve rate cuts are typically viewed as stimulative, producing lower borrowing costs, increased liquidity and a boost to risk assets. Yet history shows that markets often decline following the initial rate cut in a monetary easing cycle. With a weakening job market from the recent September 2025 job data, how will the market react to a much-anticipated Fed rate cut?

The context behind rate cuts

The Federal Reserve rarely cuts rates in a vacuum. Rate reductions generally fall into one of three categories:

Normalization cuts: These occur when inflation is under control, and the Fed is seeking to support growth after a period of tightening. In these cases, markets tend to respond positively.

Recession cuts: These are implemented when the economy is already contracting or at risk of doing so. Historically, these cuts coincide with falling corporate earnings and rising unemployment — conditions that weigh on equity valuations.