U.S. equities can weather initial Fed tightening

Sources: Bloomberg and Wells Fargo Investment Institute. Monthly data from May 1, 1983 to June 30, 2022. The S&P 500 Index is a market-capitalization-weighted index considered representative of the U.S. stock market. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results. Investing in stocks involves risk and their returns and risk levels can vary depending on prevailing market and economic conditions.

Key Takeaways

  • Action by the Federal Reserve typically has a lagged effect on the economy. Therefore, the initial rate increases in 2022 may not have a meaningful impact until later this year and into 2023.
  • Even so, history shows that the S&P 500 Index has risen in the 12 months after the first rate hike, and has been positive in every Fed tightening period over the past 40 years.