Fed Pause Good For Stocks?

The prospect of the Fed nearing an end to its tightening cycle seems like a plausible reason for a 200 point rally in the Dow - right?

In our newly released study, The Inverted Yield Curve ~ The End of The Cycle, we analyzed prior Fed rate tightening cycles since 1962. Among our findings was that in the period spanning the Fed's last rate hike to its first cut (average span of six months), the market has an average decline of nearly 7%, and has only risen during two of the nine periods. In the chart below, we created a composite chart of the S&P 500's performance during the 'limbo' period of Fed tightening cycles.

Comments

[Siva Nara]

Very useful info.

I assume that the market is headed for a correction.

[SS]

If one removes the '70 data (recession) and the '74 data (recession), and the '87 data (not a similar economy) we get a drastically different picture.

Interesting data none the less!

[x]

If one points due north, bends over and farts in the wind, it's a drastically different picture too.

1974 is the most closely correlated environment to 2006. Housing bubble, low interest rate environment transitioning to higher rates, oil bubble, copper bubble, PE of the S&P of 19, post 1968 PE bubble in equities, inflationary, weak dollar environment, global competition and American heavy industry competitive issues, protectionism..........and on and on and on

[Barry Ritholtz]

X -- too funny!

I agree that we are in a 1973/74 parallel on many levels

[Barry Ritholtz]

The chart is in this week's Barron's -- the Up and Down Wall Street Column this week.

Congrats guys!

[Don Duhon]

More bullish stocks coming up than bearish

http://donaldjduhon.com/tradestocks