The Federal Reserve’s strategy of supersize interest rate hikes gets much of the blame for triggering a bear market in stocks in 2022, but investors might be surprised by a look back at how equites have performed on the days this year when policy makers have slammed on the metaphorical monetary-policy brakes. The S&P 500
has fallen around 10% overall since Fed Chair Jerome Powell and his colleagues began the rate hiking cycle in mid-March, or three meetings ago, noted analysts at Bespoke Investment Group, in a note.
But the index, they observed, has rallied at least 1.5% on each of the three Fed meeting days during this period. The large-cap benchmark gained 2.2% on March 16 after Powell’s first rate hike of 25 basis points, or a quarter of a percentage point. On May 4, the S&P rose 3% after Powell’s second hike of 50 basis points, which was the largest such move since 2002. And at the last meeting on June 15, the S&P 500 gained 1.4% on the day following a rate hike of 75 basis points, the largest move since 1994 (see chart below).
Bespoke Investment Group