As evident from the S&P 500 and Nasdaq’s bumpy ride this year, traipsing along on the heels of Federal Reserve rate increase rumors, stocks react not only to actual changes, but the foreboding whispers that proceed them.
While it is clear that the broad market wobbles on these whispers, what is not predictable with 100 percent certainty is which stocks could move following the actual Fed rate hike. However, it is possible to speculate on which sectors (multinationals, oil, energy, etc.) could move, and which players (Boeing, Exxon, etc.) within these sectors will most likely be counted on to also move.
While the movement of the market as a whole may scuttle all over the place immediately following a rate hike, bonds are likely to outperform over the long term.
As seen in the past, multinational companies might struggle immediately following a Fed rate increase. It could be wise to keep stocks that have fallen in the past on such changes securely in your sights.
Oil has historically tumbled on Fed rate changes. Energy typically follows the path of oil.
Particularly, it could be prudent to keep an eye on multinational stocks within these sectors.
However speculative stock predictions might be, one thing is certain: History has indicated that the stock market suffers when the Fed raises rates. Within the last century, the Fed has increased rates 16 separate times; following 13 of these 16 hikes, the S&P 500 has slipped by a significant +/-5%.
Luckily, history also shows that Fed rate movements are cyclical, and the volatility that will inevitably follow a hike will simmer down partway through the rate cycle.
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