Fed Cycles

Following up on last week's post, "Fed Pause Good For Stocks", the chart below expands the composite performance of the S&P 500 to include the market's performance during the entire rate hike cycle. The shaded area represents the S&P 500's performance during prior rate hike cycles since 1962, while the blue line highlights the market's performance during the current period. For the purposes of this analysis, we are inferring that the last hike of this cycle will be on May 10th (we know the market has wrongly assumed several times as to when the cycle would end, but for now we'll stick with that date).

Besides the similarities in the pattern of the current tightening cycle versus the average of prior periods, what we find noteworthy about the chart, is that for all the attention the Fed gets, the end result is that from its first hike in rates to its first cut, the S&P 500's average performance during the entire period is an unspectacular return of 1%. Ironically, while the market rallied yesterday on hints that the Fed may end its rate hike campaign, this chart would indicate that if anything, investors may want the Fed to keep going.

    

Comments

[SS]

If we remove the recessions from the list, the numbers look dramatically different.

Here's an idea for an illuminating study -- how many mkt tops occur without a hot, frothy IPO calandar?

[Barry Ritholtz]

Nice!

Now we just need to find an analogous Pause/Resume history!

[wow power leveling]

Here's an idea for an illuminating study -- how many mkt tops occur without a hot, frothy IPO calandar?