Odaily Planet Daily reports: After U.S. core CPI inflation rose again in August, market expectations for a Fed rate hike in September surged. As a rate hike this week has become highly probable, market focus has shifted to “How will U.S. stocks perform after the hike?”
Jeff Buchbinder, Chief Equity Strategist at LPL Financial, analyzed six Federal Reserve tightening cycles since 1994 and found that the S&P 500 typically underperforms in the short term following the first rate hike, but shows significantly stronger results one year later compared to the initial months.
Compared to 2022, LPL believes the current U.S. economy faces fundamentally different conditions regarding rate hikes, with the current macroeconomic environment more akin to the late 1990s. However, this does not imply that the market conditions of 1997 will reoccur. LPL previously anticipated that even if the Federal Reserve continues to tighten monetary policy in this cycle, the overall magnitude of tightening would be unlikely to approach the levels seen from 2022 to 2023. During the previous cycle, the Fed raised rates by a cumulative 525 basis points, equivalent to 21 consecutive 25-basis-point hikes. (Investopedia)