Five key questions to ask following the US Fed rate hike
By Louise Hill, 17 Mar 17
The third 0.25% interest rate hike of this upcycle from the US Federal Reserve begs five questions, all of which have implications for the US, the globe and portfolios.
Wednesday’s 0.25% increase in US interest rates was anticipated, and priced into markets, but historically a third rate hike in a cycle led to a stock market stumble according to Russ Mould.
Mould, investment director at AJ Bell, said: “Although history shows that a third rate hike in a cycle can lead to a stock market stumble, ultimately the US stock market has forged higher providing the US economy and corporate earning remain strong.”
Analysis of eight peaks in the S&P 500 since 1971 suggests rates need to increase by 1.84% before the market reaches its peak in the cycle.
“If the Fed follows through on its dot-plot and hikes rates twice more in 2017 and three times more in 2018, then the final increase next year will be the eighth of this upcycle.
“So next year could see monetary policy provide a key test of the nine-year-old bull run.”
Tags: Federal Reserve | US