Following the Fed's first rate hike in three years, investors should note that historical trends favor a mid-term market recovery despite potential near-term volatility.
Historical 12-month returns after the first rate hike are positive on average, supporting a bullish mid-term outlook.
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The Federal Reserve has initiated a new tightening cycle with a 25-basis-point rate hike, targeting a federal funds range of 3.75%-4% to combat persistent inflation. While markets often face initial volatility during such transitions, historical data suggests the S&P 500 typically recovers to post average 12-month gains of 6.7%.
While the index often experiences short-term weakness, it has historically recovered to post an average gain of 6.7% over the subsequent 12-month period.