Is the Fed Thwarting U.S. Stocks?
Stock-Markets / Stock Markets 2014 Nov 30, 2014 - 03:33 PM GMTBy: Investment_U
Rachel Gearhart writes: The Federal Reserve may be looking to make its first round of interest rate increases since 2006 in mid-2015, but that doesn't mean you should panic.
According to Loomis, Sayles & Co. Senior Equity Strategist Richard Skaggs, "A rate hike would not present a material obstacle" to stock gains in the next year to year and a half.
But why?
This week's chart tracks the average performance of the S&P 500 Index before and after the start of eight periods of rate increases since 1972. The chart is based solely on the index's price changes and includes dividends and reinvestment income.
A year before the Fed raised target rates, the S&P averaged an 18% gain. Approximately nine months after the Fed raised rates, the index peaked.
This suggests that conditions remain favorable for investors - especially considering the central bank's current near-zero target rate, promising growth in corporate earnings and comparatively low long-term rates.
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