Capital Markets: Observations & Insights

Fed Tightening Not That Scary ​ Party Without the Punch?

• The stock market has historically risen with the Federal Funds rate

S&P 500

Fed Funds Increase

130

3.5

Cumulative Percentage Point Increase

3.0

In the past several tightening periods, stocks have actually increased alongside the Fed Funds rate

120

2.5

2.0

110

1.5

1.0

100

0.5

Total Return Indexed to 100

90

-

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

Months of Tightening Cycle

Source: FactSet. Monthly average of past two-year tightening cycles beginning in January 1994, May 1999 and May 2004. S&P 500 is based on total return.

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