Fed Hikes Interest Rates, But History Suggests Stocks Will Rise

The Federal Reserve raised interest rates by 25 basis points to 3.75%-4.00% in its first hike since July 2023, with Fed Chair Kevin Warsh and the FOMC citing a need for 'a timelier return' to the central bank's 2% inflation target.

Warsh's hawkish track record suggests that this rate-hiking cycle could be prolonged, which may worry investors, particularly given the persistently elevated inflation rate and the AI infrastructure build-out being financed with debt.

However, history supports a different outcome: the S&P 500 has been higher by an average of 12.5% one year after initial quarter-point rate hikes over the last 36 years.