Markets have hit the panic button
With the Fed tightening at a later part of the business cycle, lower corporate earnings might drag down equities
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DEVELOPMENTS in China and the oil price plunge have dominated the headlines so far this year, but some attribute the increase in market volatility to the decision by the US Federal Reserve to raise interest rates last December.
History shows us, however, that equity markets in fact generally perform very well when the Fed raises interest rates.
Looking at the last 13 tightening cycles, we see that the S&P 500 has risen in value over the 24 months leading up to, and the 24 months following, the first rate hike in the tightening cycle.
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