Rate Hikes Don't Always Equal Down Markets

Recent events have created an apparent paradox in the US stock market. The Federal Reserve raised interest rates, but tech stocks quickly recovered their losses and reached a new all-time high.

This has led to speculation that rate hikes put pressure on valuations, and historical highs suggest upside potential is shrinking. However, data compiled by Charlie Bilello shows that since 1982, the S&P 500's average return over the 12 months following a Fed rate hike has been higher than after a rate cut.

The Federal Reserve raised interest rates on September 16, marking a significant step in the current policy cycle. Just days later, the Nasdaq Composite Index reached a new all-time high on September 22.