Research suggests rate hikes could have 'benign' impact on equities

Follows Fed 75bps hike

clock • 1 min read

Stock markets have historically remained positive in months with hikes to interest rates, according to research from investment firm Dimensional, which studied 468 months of US equity market performance between 1983 and 2021, including 70 months in which rates rose and 67 in which they fell.

According to Dimensional's findings, on average, markets were positive in months with rate rises and said rates having little impact on monthly performance. The findings come days after the Federal Reserve increased the funds rate by 75bps and the Bank of England rose the base rate to 1.25%, up from 1%. In high interest rate environments, investors tend to worry valuations will decrease and have a knock-on impact on returns. Dimensional's analysis of the Fama/French Total US Market Research Index and changes to the Federal funds' target over 38 years, revealed that on average, retu...

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