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...

To continue reading this article...

Join Professional Adviser

  • Unlimited access to real-time news, industry insights and market intelligence.
  • Stay ahead of the curve with spotlights on emerging trends and technologies
  • Receive breaking news stories straight to your inbox in the daily newsletters.
  • Make smart business decisions with the latest developments in regulation, investing retirement and protection.
  • Members-only access to the editor’s weekly Friday commentary
  • 
 Be the first to hear about our events and awards programmes.

Join

 

Already a Professional Adviser member?

Login

More on Investment

Jupiter CEO Matthew Beesley

Jupiter cuts investment in unlisted assets for open-ended fund

Policy change following change in investor sentiment

Elliot Gulliver-Needham
clock 08 February 2023 • 1 min read
Robin Geffen (pictured) joined Liontrust in October 2019.

Robin Geffen to exit Liontrust amid global equity consolidation

Shift in strategic focus sees exit of Neptune founder

Valeria Martinez
clock 08 February 2023 • 1 min read
Royal Courts of Justice, London

FCA takes action against unauthorised director it alleges took £2.8m

Breach of restrictions around financial promotion also a concern

Hope William-Smith
clock 07 February 2023 • 1 min read