How Will the Market React to a Potential Fed Rate Hike in December? Here's What History Suggests.

Résumé détaillé

The Federal Reserve's December decision could move stocks, but history suggests investors should look beyond the immediate market reaction.

The Federal Reserve is widely expected to raise interest rates at its Dec. 9 meeting. CME FedWatch data indicated an 86.8% probability of a 25-basis-point (one-quarter of a percentage point) hike to 4%–4.25% and a 13.2% probability of a 50-basis-point (half percentage point) hike to 4.25%–4.50% during trading on Nov. 11.

Investors have already started reacting to changing rate expectations. After October inflation exceeded expectations, the two-year Treasury yield jumped about 18 basis points on Nov. 10. The S&P 500 (SNPINDEX: ^GSPC) fell 0.38% on that day. However, the large-cap stock index rebounded 1.3% on Nov. 11, helped by a rally in artificial intelligence (AI) stocks.

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History shows that stocks do not always fall after rate hikes. The market's response also depends on what investors expect from the Fed's future interest rate decisions.

On Dec. 16, 2015, the Federal Reserve raised interest rates by 25 basis points for the first time in nearly a decade. The S&P 500 gained 1.45% that day. Investors had anticipated the increase, and the Federal Reserve indicated that subsequent hikes would be gradual.

On Dec. 19, 2018, another 25-basis-points interest rate hike coincided with a 1.54% decline in the S&P 500. Investors were worried about slowing economic growth, while the Federal Reserve still projected additional interest rate increases. Federal Reserve Chairman Jerome Powell also indicated that the central bank would continue reducing its bond holdings, a policy that withdraws liquidity from the financial system. This added to investors' concerns about tighter financial conditions.

However, the S&P 500 gained nearly 28% over the following 12 months, during which the Federal Reserve reversed course and cut interest rates…

Début de l'article, extrait de Yahoo Finance. Pour lire la suite, ouvrez l'article chez le média.