Federal Reserve Rate Hike Looms: Will U.S. Stocks Continue to Rise?

The Federal Reserve is poised to raise interest rates for the first time in over three years at its upcoming policy meeting, sparking concern among investors about the impact on the U.S. stock market.

Historically, stocks tend to weaken initially after a rate hike before rebounding, according to Jeff Buchbinder, chief equity strategist at LPL Financial.

The S&P 500 index has risen nearly 12% year-to-date, supported by strong corporate earnings and a resilient economy. However, the index's average return during the first four months following a rate hike cycle is negative, with returns turning positive over a longer time horizon.

Some Wall Street professionals argue that if the Fed raises rates this year, investors need not worry excessively. Jonathan Shugar of Goldman Sachs noted that U.S. companies posted strong second-quarter earnings growth, and current valuations are near their ten-year average.