Surprisingly Benign: How Stocks Respond to Hikes in Fed Funds Rate

An article by Dimensional Advisors.

On May 4, the US Federal Reserve Increased the target federal funds rate by 50 basis points as part of what the central bank said will be a series of rate increases to combat soaring inflation in the US. Some investors may worry that rising interest rates will decrease equity valuations and therefore lead to relatively poor equity market performance. However, history offers good news: Equity returns in the US have been positive on average following hikes in the fed funds rate.