Interest Rates May Do Something Last Seen in 2022.
The Stock Market Will Make a Big Move Afterward if History Repeats
Year to date, the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) have added 11% and 13%, respectively. The driving force behind that upside has been strong corporate financial results. However, the Federal Reserve has become increasingly hawkish in recent months because of the impact of the Iran conflict.
Half the members on the rate-setting committee now expect at least one interest rate increase this year. That would mark the beginning of a new tightening cycle (i.e., a period where interest rates are rising). Historically, the onset of a tightening cycle has frequently coincided with steep declines in the stock market.