Federal Reserve raises rates for first time since 2023, impacting US stocks
by@Reuters
Summary
On September 24, the Federal Reserve initiated its current interest rate hike cycle, raising the benchmark rate for the first time since 2023 to combat high inflation. This decision has historically led to weakness in US stock prices, with data suggesting a median 2.6% decline in the S&P 500 three months post-hike. Analysts note that the current cycle is expected to be less aggressive compared to the 2022 hikes, which caused a bear market, as the Fed indicated further increases will follow by year-end. Investors are closely watching economic indicators like the ISM manufacturing index to assess the impact of these rate changes on corporate profits and market expectations.
Tokens
$SPX
Analysis
S&P 500: The S&P 500 is a major US stock market index representing the performance of 500 large publicly traded companies. The news examines its historical median performance patterns following the start of Fed rate hike cycles, noting typical near-term weakness followed by recovery in most past episodes. Sam Stovall: Sam Stovall is chief investment strategist at CFRA. He highlighted the role of the magnitude of rate hikes in 2022 as a key factor that spooked markets compared to the present cycle. Mona Mahajan: Mona Mahajan is head of investment strategy at Edward Jones. She characterized the current hiking trajectory as a mid-cycle adjustment that markets can likely absorb without major disruption to growth or labor conditions. Lori Calvasina: Lori Calvasina serves as head of US equity strategy at RBC Capital Markets. She discussed distinctions between the current rate hike environment and past cycles, including vigilance for a potential near-term pullback in equities. David Lefkowitz: David Lefkowitz is head of US equities at UBS Global Wealth Management. He provided analysis on how the Fed's rate actions could influence market expectations for economic growth and corporate profits amid the current hiking cycle. Federal Reserve: The Federal Reserve is the central banking system of the United States responsible for conducting monetary policy, including setting benchmark interest rates to manage inflation and support economic growth. In this news, it has begun a new rate hike cycle with its first increase since 2023 to address persistently high inflation, with signals of further moves ahead. Jeffrey Buchbinder: Jeffrey Buchbinder is chief equity strategist at LPL Financial. He noted that stocks tend to experience initial jitters after hiking cycles begin but often calm and return to fundamentals of economic and earnings growth. Monetary Policy: The Fed has signaled it expects to follow the initial rate increase with another by year-end and additional hikes thereafter. Investor Outlook: Market participants are monitoring key economic indicators, such as the ISM manufacturing index new orders component, to evaluate the stock market's response to the rate hikes. Market Cycle Comparison: Analysts distinguish the current environment from the more aggressive and recession-fearing 2022 hiking cycle that led to a bear market.
Categories
macropolitics