Historical analysis shows the S&P 500 underperforms in the week following Fed rate hikes, though current bearish sentiment among individual investors may offer a contrarian buffer for a potential rebound.
The SPX faces a bearish short-term outlook due to historical data showing an average decline of 0.54% in the week following a Fed rate hike. With current betting odds for a hike exceeding 60%, the index is susceptible to immediate post-meeting underperformance. However, the current bearish sentiment captured by the AAII poll may act as a contrarian indicator, potentially softening the impact or facilitating a faster recovery compared to historical averages.
Historically, when rates are kept steady, the SPX has averaged a gain of 0.23% in the following week, with 54% of returns being positive.
Yes, when the four-week average of the AAII poll shows more bears than bulls, the SPX has historically performed better, with stocks bouncing back faster following Fed meetings.
Historical data indicates the S&P 500 typically struggles in the week following Federal Reserve interest rate hikes, averaging a 0.54% decline. While market uncertainty remains elevated with a 60% probability of a hike next week, contrarian indicators like the AAII sentiment poll suggest potential for a faster recovery if investor pessimism persists.
Historically, the S&P 500 averages a 0.54% decline in the week following a rate hike, whereas the index averages a 0.23% gain when rates are held steady.