US rate rises: What does the past market evidence tell us?

Fidelity International

Fidelity International

The empirical evidence regarding the equity market impact from previous US rate hike scenarios is generally favourable. 1) In the one year leading up to the first rate hike, US equities have risen appreciably on each of the last four occasions, with an average rise of 17%. 2) In the period soon after the first rate hike, volatility typically spikes and corrections are possible. 3) As Chart 5 shows, in the one year after the first rate hike, returns were positive in all of the last four instances with an average rise of 6.8% in these periods. The good performance of equities in the one year leading up to and one year following the first rate hike is consistent with typically robust economic growth in these periods averaging 4.3% and 4.2% respectively for the four past hiking episodes. (VIEW LINK)


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