This thesis investigates how interest rate changes affect stock market performance across different phases of the economic cycle, with a focus on both booms and recessions. Using monthly data from 2000 to 2024, including major downturns such as the dot-com bubble, the 2008 financial crisis, and the COVID-19 recession. The study examines the relationship between interest rates and stock indices such as the S&P 500. Econometric methods, including linear regression and event study analysis, are employed to assess how monetary policy interventions influence market behavior. Results show that while interest rate changes are statistically significant predictors of stock market returns, their explanatory power is modest due to the complexity of financial markets. The analysis also reveals that the impact of interest rates is context dependent: during recessions, rate cuts tend to have a smaller immediate effect on stock prices, whereas during booms, rate hikes may trigger more pronounced market reactions. Furthermore market expectations play a crucial role in moderating these effects. These findings have important implications for monetary policymakers and investors, suggesting that economic context and market sentiment should guide interest rate decisions.