• Latest
  • Trending
  • All
  • Finance
  • Politics
  • US News
  • Political Humor
  • Technology

DON’T EXPECT THE FED TO END THIS BULL ANYTIME SOON

February 5, 2022
yt1s blog banner 20

Download YouTube Videos in HD with YT1S: No Signup Needed

October 8, 2025
Inside Spain’s Food Markets: Five That Feel More Like Art Galleries

Inside Spain’s Food Markets: Five That Feel More Like Art Galleries

October 4, 2025

Daily Composting Habits: Making the Most of Your Countertop Machine.

September 26, 2025
hydrogen-water-generators

Hydrogen Water Generator: Revolutionizing Home Health In 2025

September 26, 2025
CCR1 Protein: A Chemokine Receptor at the Crossroads of Immunity and Disease

CCR1 Protein: A Chemokine Receptor at the Crossroads of Immunity and Disease

September 26, 2025
Comprehensive Guide to CAR-T Cell Therapy Targets: Updated Landscape 2025

Comprehensive Guide to CAR-T Cell Therapy Targets: Updated Landscape 2025

September 26, 2025
Evangelos Marinakis urges end to Ukraine war, warns of economic hardship in Greece

Evangelos Marinakis urges end to Ukraine war, warns of economic hardship in Greece

September 7, 2025
Best YouTube MP3 Converter

Best YouTube MP3 Converter for All Devices Online

September 3, 2025
Power Distribution Unit PDU: Essential Guide for IT Hardware

Power Distribution Unit PDU: Essential Guide for IT Hardware

September 2, 2025
Why Access Control Security Systems Are Essential for Modern Offices

Why Access Control Security Systems Are Essential for Modern Offices

September 2, 2025
The Pros and Cons of Using X2Mate for YouTube Downloads

The Pros and Cons of Using X2Mate for YouTube Downloads

September 1, 2025
Top 5 YouTube Downloaders for High-Quality, Fast Downloads

Top 5 YouTube Downloaders for High-Quality, Fast Downloads

September 1, 2025
  • About
  • NewsTalkFlorida
  • SportsTalkFlorida
  • FeedBox
Wednesday, October 8, 2025
  • Login
  • Register
Inside The Nation
  • Daily Buzz
    How To Insulate External Doors: A Simple and Effective Guide

    How To Insulate External Doors: A Simple and Effective Guide

    Door-Rain-Deflector

    How an Exterior Door Rain Deflector Can Improve Your Home’s Curb Appeal

    The Dodgers add another star pitcher Kirby Yates

    The Dodgers add another star pitcher Kirby Yates

    NFL Network analyst Marc Ross rips Giants: “They’re a mess!”

    The Commanders lost to the Eagles but won back their fans

    NFL Network analyst Marc Ross rips Giants: “They’re a mess!”

    With Super Bowl LIX around corner, which team gets most action?

    Leading US-Bred Dirt Horses Have Excellent Chance at Dubai World Cup

  • US News
    • All
    • EDUCATION
    youth life coach Austin

    The Inspired Minds Approach to Helping Teens Navigate Life with Strength

    non denominational church

    Discovering Spiritual Growth at Plano’s Non-Denominational Churches

    Succeeding in NURS FPX 4050 Assessment 3 and 4: Elevating Your Nursing Practice with Data and Leadership

    Succeeding in NURS FPX 4050 Assessment 3 and 4: Elevating Your Nursing Practice with Data and Leadership

    teen confidence coach

    Your Teen Deserves to Feel Confident—Let Austin’s Top Life Coach Help

    electric panel repair

    Top Signs Your Home Needs Electrical Repairs

    How Tutoring Services Can Benefit A Child’s Education

    How Tutoring Services Can Benefit A Child’s Education

  • Politics
    • All
    • international News
    Evangelos Marinakis urges end to Ukraine war, warns of economic hardship in Greece

    Evangelos Marinakis urges end to Ukraine war, warns of economic hardship in Greece

    10 Reasons You Need a Firearms Lawyer for Gun Ownership Rights

    10 Reasons You Need a Firearms Lawyer for Gun Ownership Rights

    The Rays and the A’s future remains in flux

    The Rays and the A’s future remains in flux

    Harris Shines In Her Debate With Trump

    Harris Shines In Her Debate With Trump

    Look For Shapiro To Replace Blinken As Secretary Of State In A Harris Administration

    Look For Shapiro To Replace Blinken As Secretary Of State In A Harris Administration

    Harris Expected To Name Minnesota Gov. Tim Walz As Her Running Mate

    Live Video Coverage Of The 2024 DNC: Gov. Tim Walz Gets His Night To Shine

    Live Video Coverage of the Republican National Convention

    DNC 2024 The Obama’s Rock Chicago, While Pelosi Handles Protesters

    Live Video Coverage of the Republican National Convention

    Live Coverage of the 2024 Democratic National Convention: “Thank You Joe,” It Is Biden’s Night

    Biden Accomplished More Than Any Other President Since FDR – But Harris Has The Roadmap To The Future

    GOP Attacks on Harris and Walz are just wrong and misleading

    It’s Harris-Walz 2024: The Minnesota Govenor Wins The Veep Stakes

    It’s Harris-Walz 2024: The Minnesota Govenor Wins The Veep Stakes

    • Political Humor
      youtube downloader

      The Importance of YouTube Downloader in Today’s Digital Music World

      Molecular Dynamics Simulation: A Powerful Tool for Molecular Research

      youtube to mp3

      The Role of YouTube to MP3 Converter in the Era of Digital Music Access

      How Can GST Help Industrial Businesses Claim Input Tax Credit Efficiently

      Innovating Nucleic Acid Detection: Advanced Minor Groove Binder (MGB) Probes and Custom Solutions

      How to Convert YouTube Videos to MP3 Using Tubidy

      How to Convert YouTube Videos to MP3 Using Tubidy

      Custom Synthesis: A Comprehensive Exploration of Key Elements in Chemical Production

      The Benefits of Custom Application Development for Businesses in Detroit

      The Benefits of Custom Application Development for Businesses in Detroit

      Digital physiotherapy

      How Digital Physiotherapy is Transforming Rehab: Smart Tech for Faster Recovery

  • Business
    • All
    • Finance
    • Marketing
    • Real Estate
    • Technology
    yt1s blog banner 20

    Download YouTube Videos in HD with YT1S: No Signup Needed

    Daily Composting Habits: Making the Most of Your Countertop Machine.

    Evangelos Marinakis urges end to Ukraine war, warns of economic hardship in Greece

    Evangelos Marinakis urges end to Ukraine war, warns of economic hardship in Greece

    Power Distribution Unit PDU: Essential Guide for IT Hardware

    Power Distribution Unit PDU: Essential Guide for IT Hardware

    Why Access Control Security Systems Are Essential for Modern Offices

    Why Access Control Security Systems Are Essential for Modern Offices

    Micro Market Vending

    Micro Market Vending: Revolutionizing Workplace Breaks

    Corporate Catering

    Corporate Catering: The Smart Way to Fuel Workplace Events

    music downloader

    Free MP3 Music Downloader Tools You Should Try – Fast & Easy

    Rebuilding Broken Product Processes: When It’s Time to Rethink Your PLM Strategy

    Rebuilding Broken Product Processes: When It’s Time to Rethink Your PLM Strategy

  • Entertainment
    Best YouTube MP3 Converter

    Best YouTube MP3 Converter for All Devices Online

    The Pros and Cons of Using X2Mate for YouTube Downloads

    The Pros and Cons of Using X2Mate for YouTube Downloads

    Top 5 YouTube Downloaders for High-Quality, Fast Downloads

    Top 5 YouTube Downloaders for High-Quality, Fast Downloads

    music downloader

    Free MP3 Music Downloader Tools You Should Try – Fast & Easy

    youtube downloader

    The Importance of YouTube Downloader in Today’s Digital Music World

    mp3 juice

    Top 5 MP3 Downloaders You Can Use on Any Device

    TikTok Video Downloader

    Fast and Free TikTok Video Downloader – No App Needed

    ERP for Manufacturing

    ERP for Manufacturing: What It Is, How AI Is Transforming It, and Your Guide to Building Custom ERP Software

    How to Convert YouTube Videos to MP3 Using Tubidy

    How to Convert YouTube Videos to MP3 Using Tubidy

    Cannes to Host D-Day Film Festival Honoring Joséphine Baker and Transatlantic Heritage

    Cannes to Host D-Day Film Festival Honoring Joséphine Baker and Transatlantic Heritage

  • Environment
    youtube downloader

    The Importance of YouTube Downloader in Today’s Digital Music World

    Molecular Dynamics Simulation: A Powerful Tool for Molecular Research

    youtube to mp3

    The Role of YouTube to MP3 Converter in the Era of Digital Music Access

    How Can GST Help Industrial Businesses Claim Input Tax Credit Efficiently

    Innovating Nucleic Acid Detection: Advanced Minor Groove Binder (MGB) Probes and Custom Solutions

    How to Convert YouTube Videos to MP3 Using Tubidy

    How to Convert YouTube Videos to MP3 Using Tubidy

    Custom Synthesis: A Comprehensive Exploration of Key Elements in Chemical Production

    The Benefits of Custom Application Development for Businesses in Detroit

    The Benefits of Custom Application Development for Businesses in Detroit

    Digital physiotherapy

    How Digital Physiotherapy is Transforming Rehab: Smart Tech for Faster Recovery

  • Health
    youtube downloader

    The Importance of YouTube Downloader in Today’s Digital Music World

    Molecular Dynamics Simulation: A Powerful Tool for Molecular Research

    youtube to mp3

    The Role of YouTube to MP3 Converter in the Era of Digital Music Access

    How Can GST Help Industrial Businesses Claim Input Tax Credit Efficiently

    Innovating Nucleic Acid Detection: Advanced Minor Groove Binder (MGB) Probes and Custom Solutions

    How to Convert YouTube Videos to MP3 Using Tubidy

    How to Convert YouTube Videos to MP3 Using Tubidy

    Custom Synthesis: A Comprehensive Exploration of Key Elements in Chemical Production

    The Benefits of Custom Application Development for Businesses in Detroit

    The Benefits of Custom Application Development for Businesses in Detroit

    Digital physiotherapy

    How Digital Physiotherapy is Transforming Rehab: Smart Tech for Faster Recovery

  • Our SItes
    • FeedBox
    • NewsTalkFlorida
    • SportsTalkFlorida
No Result
View All Result
Inside The Nation
No Result
View All Result
Home Business

DON’T EXPECT THE FED TO END THIS BULL ANYTIME SOON

by LPL Financial
February 5, 2022
in Business, Finance, Uncategorized
0
513
SHARES
1.5k
VIEWS
Share on FacebookShare on Twitter

 

The Federal Reserve (Fed) has engineered a massive hawkish shift, causing a bit more stock market volatility recently. But how worried should investors be? Here we take a look back at historical performance for stocks before, after, and much after initial Fed rate hikes to help reassure any nervous investors out there. We also take a quick look at what the Fed pivot could mean for growth/value and large cap/small cap trends given the maturing business cycle.

 

MASSIVE HAWKISH SHIFT

 

With the recent pivot by Jay Powell and Company at the Fed, rate hikes have been getting a lot of attention. And rightly so, given the bond market has gone from pricing in one 2022 rate hike just a few months ago to now pricing in three to four. That’s one of the most dramatic hawkish shifts by the Fed in a short period of time that we’ve ever seen, so some market jitters are not surprising.

 

HOW MUCH SHOULD WE WORRY?

 

A look back at history may help calm some investors’ jitters around the start of Fed rate hikes. As we wrote in our Outlook 2022: Passing the Baton, stocks tend to do well leading up to initial Fed rate hikes. There we highlighted the average 15% gain during the 12 months ahead of the initial hike of an economic cycle, including gains in all nine cases back more than 60 years. This makes sense given it takes a strengthening economy to create the job gains and inflation the Fed needs to see to take away the punchbowl. We see the first rate hike coming in either March or May, and with the S&P 500 Index up nearly 20% since March of 2021, and more than 10% since May 2021, those gains may already have occurred.

Looking beyond the initial hike, on our LPL Research blog last week we looked at how stocks performed during various periods after the Fed starts to hike rates. The story is similar, with the S&P 500 up an average of 7.5% six months later and 10.8% over the next 12 months historically. Stock were up all eight times one year after those initial hikes going back to the early 1980s. So based on history, the start of a rate hiking campaign by the Fed should not be too worrisome for investors.

 

LOOKING OUT LONGER TERM

 

But what does the hike mean further out, say 2023 and beyond? In Outlook 2022, we noted that initial Fed rate hikes can help us mark where the economy is in its cycle. The start of rate hikes typically happens in the early-to-middle stages of the cycle, where stocks historically see solid gains as we are forecasting for 2022.

But we can extend this exercise further and look at how stocks have done from the initial rate hike of a cycle until the end of the accompanying bull market, as we have done in [Figure 1]. Those first rate hikes have been followed by an average gain of 67% before the subsequent bull market peak. For those keeping score at home, that would take the S&P 500 to over 7,700 (no, that is not a forecast) before the next 20% or more decline.

On average, after rate hikes start, bull markets have run for about three to four years (or 40 more months) before peaking, with the longest in the late 1990s at six years (72 months) between the 1994 hike and the bull market top in March of 2000.

 

 

We can also look at where in economic cycles these first rate hikes occurred based on the dates of the economic expansion. This can give us a rough idea of how much more economic growth we might expect after the Fed starts hiking rates.

This exercise reveals that, on average, expansions were 40% completed upon arrival of the Fed’s first hike. However, the August 1983 hike occurred only about one-quarter of the way through that expansion, which we think is more representative of how long this unusual cycle may last. We’re not even two years in and we think this cycle has a few more years left.

 

IMPLICATIONS FOR THE GROWTH-VALUE ROTATION

 

After growth stocks performed so well throughout much of the pandemic, value stocks have shown signs of life recently. Year to date the Russell 1000 Value Index has gained 1%, ahead of the more than 5% drop in the 1000 Growth Index. That follows about four percentage points of outperformance by value in December.

As shown in [Figure 2], the relative strength of value stocks has been closely tied to the yield curve, or the difference between 2-year and 10-year U.S. Treasury yields. A steeper yield curve tends to be good for financials, the biggest value sector, so this makes sense.

 

 

One of the reasons we squared up our views on the growth and value styles this month in our latest Global Portfolio Strategy report is because we think the opportunity for yield curve steepening may be somewhat limited now that the Fed pivot has occurred and the bond market is pricing in more than three rate hikes for 2022. If the 10-year yield doesn’t get much higher than 2% this year, as we expect, and the Fed follows through with a series of hikes and maintains its credibility as an effective inflation fighter, then the yield curve may actually flatten.

We are not worried about an inverted yield curve signaling recession, but we are skeptical that value stocks will continue to outperform at such a strong pace for much longer even with support from strong, though slower, economic growth and a likely further rise in interest rates.

 

SCALES MAY BE TILTING TOWARD LARGE CAPS

 

Small cap stocks have historically done better early in economic expansions, so as this cycle matures, large caps may have an edge. While we do not fear an impending recession, we do believe tighter monetary policy marks the economy’s progress toward mid-cycle. As such, we have become a bit less enamored with small caps, taking our view down from positive to neutral this month.

While small caps have historically performed well in inflationary environments, this cycle is unique and we believe larger companies are better positioned for the current environment of supply chain challenges and labor shortages (where a big chunk of the inflation is coming from). In addition, weakness in biotech and other more speculative, richly valued pockets of the market, should it continue, will make it difficult for smaller cap stocks to keep up with their mostly higher quality, better-resourced large cap peers.

 

CONCLUSION

 

The Fed has engineered a massive hawkish pivot, contributing to an increase in volatility recently. But a look back at history provides some reassurance, as stocks have historically performed well leading up to and after the first rate hike of a cycle, with significant upside before eventual bull market tops. Bottom line, even with rate hikes coming soon, we think this economic cycle and bull market have quite a bit left in the tank.

By

Jeff Buchbinder, CFA, Chief Equity Strategist, LPL Financial

Ryan Detrick, CMT, Chief Market Strategist, LPL Financial

 

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The PE ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher PE ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower PE ratio.

Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio.

All index data from FactSet.

 

This research material has been prepared by LPL Financial LLC.

 

 

 

 

 

Comments
LPL Financial
+ postsBio
  • LPL Financial
    #molongui-disabled-link
    STRONG EARNINGS MOMENTUM TO START 2022
  • LPL Financial
    #molongui-disabled-link
    U.S. MARKETS HAVE BEEN SKIING UPHILL
  • LPL Financial
    #molongui-disabled-link
    Analysis: What Is Ahead For U.S. Markets In 2022?
Share205Tweet128Share36SharePin46
LPL Financial

LPL Financial

Plugin Install : Widget Tab Post needs JNews - View Counter to be installed
  • Trending
  • Comments
  • Latest
Hitman shoots husband and kills son of Judge overseeing Deutsche Bank Epstein trial

Hitman shoots husband and kills son of Judge overseeing Deutsche Bank Epstein trial

July 20, 2020
Tanzanian President Samia’s trip to Europe Is a Strategic Move

Tanzanian President Samia’s trip to Europe Is a Strategic Move

February 18, 2022

The 4Rs of Tanzania President Samia

October 7, 2022
The Role of AI in Human Resources

The Role of AI in Human Resources

1
Girl with Shopping bag

8 Super Effective Shopping Tips to Save More Money in Chandigarh Malls 2023

1
Bubble-Wrap-For-Packing

The Benefits of Using Bubble Wrap for Packing

1
yt1s blog banner 20

Download YouTube Videos in HD with YT1S: No Signup Needed

October 8, 2025
Inside Spain’s Food Markets: Five That Feel More Like Art Galleries

Inside Spain’s Food Markets: Five That Feel More Like Art Galleries

October 4, 2025

Daily Composting Habits: Making the Most of Your Countertop Machine.

September 26, 2025
Inside The Nation

Copyright © 2020 Inside The Nation.

Navigate Site

  • About
  • NewsTalkFlorida
  • SportsTalkFlorida
  • FeedBox

Follow Us

No Result
View All Result
  • Daily Buzz
  • US News
  • Politics
    • Political Humor
  • Business
  • Entertainment
  • Environment
  • Health
  • Our SItes
    • FeedBox
    • NewsTalkFlorida
    • SportsTalkFlorida

Copyright © 2020 Inside The Nation.

Welcome Back!

Login to your account below

Forgotten Password? Sign Up

Create New Account!

OR

Fill the forms below to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In