History reveals three important lessons with the US Federal aptitude for raising interest rates ..#FedRateWatch Citi informed investors in a Wednesday note that it drew three lessons from history in light of expectations that the Federal Reserve will raise interest rates, stressing that this step does not necessarily mean the end of the rising stock market.
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Bank economists expect a rate hike this week as part of a broader shift, since the number of global central banks moving toward tightening monetary policy has surpassed those moving toward easing for the first time in years. Citi believes the Bank of Japan and the European Central Bank will continue to raise rates, as reflected in its outlook, which also included a similar hike from the Bank of England.
Meanwhile, yields on US Treasury bonds with a 10-year maturity have surpassed 5%.
Looking back to the 1970s, Citi found that "global stocks tend to be volatile at the beginning of rate-hiking cycles, but continue to rise after 6 and 12 months later."
Stocks rose in only one-third of the cases during the three months that followed the first rate hike, but in most cases they were higher after 12 months by around 7% on average.
"The first Federal rate hike is not what ends bull markets" ,
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Bank economists expect a rate hike this week as part of a broader shift, since the number of global central banks moving toward tightening monetary policy has surpassed those moving toward easing for the first time in years. Citi believes the Bank of Japan and the European Central Bank will continue to raise rates, as reflected in its outlook, which also included a similar hike from the Bank of England.
Meanwhile, yields on US Treasury bonds with a 10-year maturity have surpassed 5%.
Looking back to the 1970s, Citi found that "global stocks tend to be volatile at the beginning of rate-hiking cycles, but continue to rise after 6 and 12 months later."
Stocks rose in only one-third of the cases during the three months that followed the first rate hike, but in most cases they were higher after 12 months by around 7% on average.
"The first Federal rate hike is not what ends bull markets" ,