To The Moon

$DJIA(.DJI)$ fell 0.30% to 32,899.37 on Friday, extending Thursday's losses. $NASDAQ(.IXIC)$ was down 1.40% at 12,144.66;  $S&P 500(.SPX)$ was down 0.57 % at 4,123.34.

Why Market Plummeted? Joining the Vote of 8 Biggest Factors!

Weekly Recap: Energy Sector Top the Increase By 7.4%, Will Trend Continues?

A share and Hong Kong stocks also fell sharply. $SSE Comp(000001.SH)$ fell 2.16% to close at 3,001.56, only one step below 3000. $SZSE Comp(399001)$ fell 2.14%,$ChiNext(399006)$ fell 1.90%. $HSI(HSI)$ was down 3.81% at 2,001.96, while $HSTECH(HSTECH)$ was down 5.23%.

Some market analysts believe that the Fed's interest rate hike and balance sheet reduction decision causing the turbulence in the US stock market and global market.

The Fed's decision to raise interest rates is not a sudden, and Powell has given preventive shots many times. Let's learn from history today to see how the index performs after raising interest rates?

Figure 1: The $S&P 500(.SPX)$ Overall Performances During Fed Rate-hike Cycles

Truist Advisory Services' analysis of a total of 12 rate-hike cycles found that the S&P 500 had an average annualized return of 9.4% during those cycles, with 11 of them showing positive returns.​

Figure 2: The $S&P 500(.SPX)$Performance in the First Year of a Fed Rate-hiking Cycle

The red dots represent the first rate increase in the Fed's cycle. As you can see from the chart below, the worst performance since 1994 has been two or three months after the first rate increase. Basically from the first interest rate hike half a year, the S&P 500 trend has significantly improved; In the year after raising rates, there were only three negative returns. (Photo by @Alan聊特斯拉 )

​An analysis of four rate-raising cycles by Evercore ISI found that the S&P 500 fell by an average of 4% in the first month of the cycle, was up 3% in the sixth month and % in the 12-month period.

Figure 3: The Performance of Various Sectors in the Rate Hike Cycle

Within sectors, energy is the best performer, with positive returns of 15.7% a year later. By contrast, the medical profession may be more of a test of psychological endurance. Value stocks have fared better than cyclical stocks, up nearly 15% over the year.

To be sure, higher interest rates do weigh on stocks in the short term. But it is doubtful that a rate hike will necessarily lead to a fall in the stock market.

John Templeton, known as the "father of global investment" and "one of the most successful fund managers of all time", has a famous saying:

"Bull markets are always born in pessimism, grow in doubt, mature in optimism and die in excitement. The most pessimistic times are the best times to buy, and the most optimistic times are the best times to sell."

As @FlowingCash put it: "Good years always pop up in the midst of pessimism."

Finally, here's what you think the stock market is going to do:

• How do you think the interest rate hike will affect the stock market?
• When do you think the stock market will adjust in the future?

Tiger coins is ready, welcome to speak freely ~