What does Fed rate hike mean for the market?
The big news today is that Chairman Jerome Powell and the Federal Reserves announcing a 25 basis point hike in interest rates. Let's see how this could potentially affect the market. If we take a look back at historical data, the S&P 500 has averaged a 3.7% growth, 12-months following the first rate hike of each cycle from 1971 to 2004. 24 months after the first hike, it has seen an average of 16.3% growth and averaged 31.0% after 36 months.
With more recent data, the S&P rose 8% during a rate hike cycle from December 2015 to December 2018, and has average a growth rate of 9.4% during 12 rate hike cycles dating back to 1954.
With the interest rising, we don’t find any reason to move or adjust your portfolio one way or another. The markets tend to price in these events fairly quickly.