Fed Hikes Interest Rates, But Stocks May Still Soar

The Federal Reserve raised interest rates by 25 basis points to 3.75%-4%, marking the first time it had increased the federal funds rate in more than three years.

This is part of a new tightening cycle, and Fed Chair Kevin Warsh wants to return inflation to around 2%.

Past rate hikes have led to initial declines, but stocks generally perform well in the following 12 months.

In fact, outside of the 2022 bear market, the S&P 500 produced positive returns after an initial rate hike in each of the other five tightening cycles.