After the Fed’s first rate hike since 2023 last week, investors are weighing near-term risks against past recoveries: across six cycles since 1994, the S&P 500 fell a median 2.6% in the three months after an initial hike, while its median one-year gain was 6.8%.
The S&P 500 had gained more than 12% this year and was near a record Wednesday. The Fed raised its benchmark rate by a quarter point and signaled another hike by year-end; futures on Wednesday suggested a peak around 4.8% in a little over a year, with total increases of just over 100 basis points.
RBC said five cycles saw S&P 500 declines of 8% to 14% from peak levels, with lows one to three and a half months after the first hike. The 2022-23 cycle was an exception: the index fell 25% from its peak and hit its low about seven months after the first hike. Analysts cited recession fears and a particularly aggressive pace; the Fed raised rates by 525 basis points during that cycle.
