<<This is not an academic paper, so please enjoy it for fun!>>
When past FOMC interest rate hikes were expected and actually occurred, I checked the domestic and US stock etc. return rates (for the last 5 years) one week before, the day before, on the day of, and one week after the hike (source: ChatGPT).
o Result: There was no particular direction.
- Before the hike: If a hike is already expected, stock prices do not necessarily decline.
- On the day of the hike: The extent of the hike is less important than Fed Chair Powell's remarks, dot plot, and future interest rate outlook.
- One week after the hike: The market determines stock prices based on the final interest rate, the timing of a potential rate cut, and the possibility of an economic recession.
- Stronger than expected hike: Stock prices could be significantly more impacted.
"The interest rate hike itself" is less important than the Fed's future interest rate path after the hike,
Kevin Wash's remarks, dot plot, and future interest rate outlook on the day of the interest rate hike will be important.
Reference) Stock direction after expected and actual interest rate hikes
FOMC | Rate Hike | Index | 1 Week Before→Previous Day | Previous Day→Same Day | Same Day→Next Day | Same Day→1 Week After |
|---|
2022.03.16 | +25bp | S&P500 | -0.36% | +2.24% | +1.23% | +2.26% |
| | KOSPI | -0.03% | +1.44% | +1.33% | +2.85% |
2022.05.04 | +50bp | S&P500 | -0.20% | +2.99% | -3.56% | -8.49% |
| | KOSPI | +1.57% | -0.11% | -1.23% | -3.19% |
2022.07.27 | +75bp | S&P500 | -0.98% | +2.62% | +1.21% | +3.27% |
| | KOSPI | +1.09% | +0.11% | +0.82% | +1.90% |
2022.09.21 | +75bp | S&P500 | -2.28% | -1.71% | -0.84% | -1.87% |
| | KOSPI | -1.81% | -0.87% | -0.63% | -7.58% |
2022.11.02 | +75bp | S&P500 | +0.67% | -2.50% | -1.06% | -0.30% |
| | KOSPI | +3.81% | +0.07% | -0.33% | +3.75% |
2022.12.14 | +50bp | S&P500 | +2.18% | -0.61% | -2.49% | -2.93% |
| | KOSPI | -0.44% | +1.13% | -1.60% | -2.93% |
2023.02.01 | +25bp | S&P500 | +1.50% | +1.05% | +1.47% | -0.03% |
| | KOSPI | -0.14% | +1.02% | +0.78% | +1.38% |
2023.03.22 | +25bp | S&P500 | +2.85% | -1.65% | +0.30% | +2.31% |
| | KOSPI | +0.36% | +1.20% | +0.31% | +1.12% |
2023.05.03 | +25bp | S&P500 | +1.57% | -0.70% | -0.72% | +1.15% |
| | KOSPI | +1.59% | -0.91% | -0.02% | -0.20% |
2023.07.26 | +25bp | S&P500 | +0.04% | -0.02% | -0.64% | -1.17% |
| | KOSPI | +1.08% | -1.67% | +0.44% | +0.93% |
