Study: the Fed's rate hike is short term bearish for stocks


The Fed is expected to hike interest rates next Wednesday.
Rate hikes in the current rate hike cycle have been a short term bearish factor for the stock market. The stock market has tended to go down or swing sideways during the next 2 weeks after a rate hike.
Here’s what happened to the S&P 500 after each rate hike in the current rate hike cycle.

Click here for the Excel file.
Here are the historical cases in detail.
March 21, 2018
The S&P 500 fell for a few days after this rate hike.

December 13, 2017
The stock market didn’t go up by much in the 2 weeks after this rate hike.

June 14, 2017
The stock market swung sideways during the 2 weeks after this rate hike.

March 15, 2017
The stock market trended downwards in the month after this rate hike.

December 14, 2016
The stock market swung sideways in the 1 month after this rate hike.

December 16, 2015
The stock market cratered after this rate hike.

Conclusion

The Fed will probably hike rates next Wednesday (June 13, 2018). With the S&P 500 near resistance, this rate hike is a short term bearish factor for the stock market. The stock market will probably either swing sideways or make a pullback.
However, rate hikes = a medium-long term bullish factor for the stock market (see study). So short term weakness, medium-long term bullish. Focus on the medium-long term, which is much easier to predict than the short term.

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2 comments add yours

  1. Hi Troy,
    i hope you are doing well. Just a question for you:
    WHY the stock market has tended to go down or swing sideways during the next weeks after a rate hike. Why the market reacts in this way? Do you know the mechanics behind this phenomenon? What are the market participants afraid temporarily? Then they forget it and the market goes up again?
    Stay healthy, trade green,
    protect your capital from yourself.
    Thx!

    • I don’t know Georgios. Every once in a while the media likes to talk about “how rate hikes will kill the economy”.

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