Fed Rate Hikes Bring Unexpected Market Calm

The Federal Reserve raised interest rates last week for the first time since 2023. New Fed Chair Kevin Warsh signaled his commitment to controlling inflation by increasing rates, which boosted investor confidence in the Fed's independence and its goal of slowing down inflation.

This move may not lead to a market crash as it did previously when the S&P 500 (SNPINDEX:^GSPC) fell more than 19% after rate hikes began in the previous year. Instead, investors may see added confidence with higher interest rates, which are still far lower than they were three years ago, at around 5%. The current rate range is between 3.75%-4.00%.

Investors should be cautious, however, as some stocks are overvalued and trading at high multiples that could lead to significant downside risk in case of a correction or market crash.