Fed Rate Hike Cycle May Bring Market Dip

The Federal Reserve raised interest rates for the first time since 2023, and it's likely to continue raising them in the near term to combat inflation.

History suggests that stocks typically dip during a Fed rate hike cycle but recover within a year. In five of the last six Fed rate hike cycles, the S&P 500 has declined between 1.6% and 15.5% three months after the first hike.

Average returns show that the S&P 500 has fully recovered within 12 months of the first hike in four out of five periods. The median gain for the index during this time is 6.8%.

To capitalize on any potential market decline, author Matt DiLallo is strategically building cash and a watch list of stocks to buy if prices fall.