S&P Returns during years with 4 or more Rate Hikes

I found this interesting piece of data on Twitter which talks about how S&P 500 Index performed in the years where 4 or more rate hikes have happened. (Do note that market is expecting 4 rate hikes in 2022)

Here’s the data about how S&P 500 fared in such years from 1978 :

1978 = 1%
1979 = 12.7%
1980 = 28%
1988 = 12.4%
1994 = (-1.5%)
2004 = 9.3%
2005 = 3%
2006 = 14%
2018 = (-6%)

Source : Seth Golden

In last 42 years, there have been 9 such years in which 2 years gave negative returns, 3 years gave single digit positive returns and 4 years gave double digit returns.

What will the 10th year (if at all, it happens in 2022) deliver? :face_with_monocle:


Here’s what happened in the past when there was a 50 basis points rate hike

Source : Ryan Detrick

Past has so far - Indicated all is well for mrkts during rate hike cycle. But one point of caution is the difference btwn the interest rates in the past and present. we are at the lowest possible levels currently. So, the pain may have to endured for a longer duration.


Exactly, comparison with past on absolute numbers is futile.
For eg. in 1980 if rate was already at 20% and it is increased by 1% (hardly 5% increase in rate) its impact on economy will be totally different then today when rate are probably 0.5% and are being increased by 1% (200% increase in rate)
Also, today the leverage is much higher than what it would have been in 1980.

So don’t think data is directly comparable.