Over the past several months, you’ve heard a lot of market panic about rate hikes from the Fed.
The logic goes that when the Fed hikes rates, money gets harder to borrow, and people on Wall Street freak out, negatively affecting the overall market.
And in recent weeks, while the overall market has been in a very bearish mood, pending rate hikes are frequently blamed in the mainstream media.
And I’ll admit, I’ve had several live classes where I talk about the inevitability of higher rates and the probability that those moves would tank the markets.
But the other day, I saw some data that challenged that theory…
Special Class: Cyber Trading University
Yesterday, I had the awesome privilege to teach at Fausto Pugliese’s Cyber Trading University.
I actually have joined Fausto’s programs before, and I think my students and has students have a ton in common.
So I asked Fausto if I could share this special lesson with you, and he kindly agreed.
I came across this info on Twitter and thought it was really interesting:
Looking at data from the last 97 years on the S&P 500, we see that typically, years with a lot of rate hikes don’t necessarily damage the markets all that much.
In years where we’ve seen just one rate hike, the average return has been 12.1%.
In years with two, it drops down to 2.5%. But in years with 3, it picks back up to 15.6%. And with four, like we’re expecting this year? A whopping 24.5%!
Now, that’s pretty fascinating!
But I wouldn’t read too much into it, and I certainly wouldn’t go out and buy a ton of bullish options positions just because of one tweet.
Maybe the rate hikes are more a symptom of the disease than the disease itself.
This time around, the rate hikes are a direct response to a crazy increase in inflation.
The economy isn’t healthy and it isn’t showing signs of turning around.
The Fed isn’t raising rates because they really want to, or it seems like a good idea. It’s their only choice in these volatile economic conditions.
And the proof is in the pudding, we’re currently experiencing a pretty significant reversal.
Either way though, I think this info is fascinating.
It’s another sign that we can’t always assume the mainstream media knows what is happening and that we have to take the time to step back and do the real technical analysis before jumping to stock market conclusions.
Jeffry Turnmire and InvestPub do not provide investment advice. Trading involves a substantial risk of loss and is not suitable for all investors. Many traders fail and you should not trade with money you cannot afford to lose. If you need personal financial advice, consult a financial advisor.
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