The overwhelming consensus is that the Federal Open Market Committee meeting on July 30-31 will reduce the Fed funds rate. A Reuters poll shows 95% of economists are anticipating that and the CME futures market implies 100% probability of at least a 25 basis points reduction to 2-2.25%. So what happens next?

My colleague Tom Lee wrote last week that a market "blast off" occurs when the Fed cuts and US isn’t in recession. Well folks, it seems pretty unlikely we're in the midst of a recession. And the average return of the S&P 500 index over the six months following one of those non-recessionary cuts is 13.5% and 16.5% over 12 months.

Assuming a cut happens, next year or so could be a very good time indeed for the equities markets, if history is any guide. The US economy seems healthy enough—second quarter gross domestic product growth was 2.1% on an annual basis, according to figures released Friday—and consumer metrics are in good shape. Lending is up, retails sales reached record highs in June, as did spending on motor vehicles and parts dealers.

Of course, this begs the questions why a cut is necessary. John Williams, vice chairman of the Fed's rate-setting committee and head of the regional Fed bank in New York, said last week that "When you have only so mu...

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