UBS Group: Don't Panic Over Imminent Fed Rate Hikes

As the Federal Reserve prepares to announce its interest-rate decision, markets are on high alert for a potential storm of rate hikes. However, according to UBS Group, there is no need for excessive panic.

The bank's research report shows that in the past 16 rate-hike cycles since 1954, the S&P 500 index has averaged a 10.8% gain in the 12 months following the first rate hike.

Moreover, UBS Group points out that the S&P 500 has never entered a bear market within one year of the start of a rate-hiking cycle.

The key factor determining the medium- and long-term trajectory of US stocks is corporate earnings growth, rather than this round's first rate hike, according to UBS Group.

David Lefkowitz, leader of the UBS Group strategy team, notes that the new orders sub-index of the US ISM Manufacturing Index is a leading indicator for explaining US stock market performance after interest rate hikes take effect.