Study: what happens to stocks, forex, commodities, and bonds when the Fed hikes rates


The Fed is expected to hike interest rates today. As I’ve demonstrated in a previous study, the U.S. stock market has a tendency to fall a little after rate hikes in the current rate hike cycle.

But what about other markets? How have other markets performed after the Fed hikes interest rates in the current rate hike cycle?
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Here’s what happens next to the U.S. Dollar Index when the Fed hikes interest rates in the current rate hike cycle.

Notice how the U.S. Dollar tends to fall on the day that the Fed hikes interest rates. This certainly goes against traditional dogma which states that “the U.S. Dollar should rise when the Fed hikes rates”.
Here’s what happens next to the Euro (EURUSD) when the Fed hikes interest rates in the current rate hike cycle.

Here’s what happens next to gold when the Fed hikes interest rates in the current rate hike cycle.

Notice how gold tends to go up on the day that the Fed hikes interest rates. Once again, this goes against traditional dogma which states that gold should fall when the Fed hikes rates.
Here’s what happens next to the 10 year Treasury yield when the Fed hikes interest rates in the current rate hike cycle.

Notice how the 10 year Treasury yield doesn’t always go up when the Fed hikes interest rates. This also goes against traditional dogma. The 10 year yield sometimes falls because the yield curve flattens when the Fed hikes rates. This causes short term rates to rise while long term rates swing sideways.

Conclusion

This study is useful for short term traders but isn’t very useful for medium-long term traders. Focus on fundamentals and technicals. Don’t put too much emphasis on what the Fed does, because the Fed is data-dependent (i.e. they base their decisions on the  fundamentals).
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