Our mission is to help you obtain financial freedom. Checkout Our Youtube Channel Checkout Our Youtube Channel
Blog

Historical Patterns Suggest Possible Surge in Stocks and 401(k) If Fed Pauses Rate Hikes

Although there is still some uncertainty about the Federal Reserve concluding its aggressive campaign to raise interest rates, a potential shift in the Fed’s strategy could offer a favorable outlook for the stock market and individual retirement savings plans, like the 401(k).
Let’s remember that as rates increase, the cost of borrowing typically increases, affecting mortgages, loans, and corporate earnings, and this trend often makes stocks less attractive compared to bonds due to the rising yields of bonds. However, a pause in rate hikes can lead to an improved economic outlook and make stocks more appealing than bonds, especially because market uncertainty tends to reduce.
According to historical trends, following the end of rate hike cycles since 1974, the average increase in the S&P 500 in the twelve months after the final rate hike was around 14.3%. This contrasts significantly with average returns observed over longer periods—five, ten, thirty years, or even a century—highlighting investors’ preference for a pause in rate hikes by the central bank. Moreover, the recent behavior of the stock market seems to reflect this positive response to the potential switch, taking into account that following the release of the favorable consumer price index report, the S&P 500 has risen by more than 100 points or 2.3%. Consequently, experts are now predicting promising stock performance in the upcoming year if July indeed marked the conclusion of rate hikes.
Furthermore, as a 401(k) typically includes investment options like stocks, bonds, and mutual funds, if the stock market performs well due to the Fed halting rate hikes, the value of investments within a 401(k) that are tied to stocks may increase, potentially leading to higher retirement savings for individuals.
Nonetheless, despite these encouraging signs, caution is warranted as although most economists anticipate no further rate increases, some Federal Reserve officials have not entirely ruled them out. Additionally, historical data suggests that pausing rate hikes did not always guarantee lasting market gains, and in certain instances, the stock market suffered notable losses even after the Fed stopped raising rates.
Therefore, while a pause of rate hikes might signal positivity, a guaranteed rise cannot be fully assured!

1 Comment
Inline Feedbacks
View all comments
user
4 months ago

Test

More ClearValue Insights

Default Thumbnail

SPCE 20-1 Reverse Split on Monday

On Monday June 17 SPCE will trade at a significantly higher price after a 20-1 reverse stock split. This is an attempt to keep the stock price higher to protect SPCE from getting delisted. This event could cause the price to rally, but so far we are seeing a dip headed into the date. I […]

Read More
Default Thumbnail

SOFI Trending Down to My Buy Target

I have been bearish on SOFI and I gave the yellow trendline as a key price target. It’s taking a lot of time and patience for SOFI to drop, but the price is starting to trend down to the buy target. I have $5.70-$5.80 as my target for buying near the yellow trendline. ChartChamp socials: https://linktr.ee/realchartchamp

Read More
Default Thumbnail

MPW Starting to Show Bearish Signs

MPW has been in a bullish uptrend along the yellow trendline. The price action is starting to show some weakness with a drop below the yellow support line. I have the white trendline as a key support level to monitor around $4.60. The light blue trendline remains as a key price target as well, currently […]

Read More