Rate hikes could have 'benign' impact on equities

Follows Fed 75bps hike

Stock markets have historically remained positive in months with hikes to interest rates, according to research from investment firm Dimensional.

The study, which analysed 468 months of US equity market performance between 1983 and 2021, found markets were generally positive in months with rate rises, indicating the rates had little impact on monthly performance. These findings come days after the Federal Reserve increased the funds rate by 75bps and the Bank of England upped the base rate to 1.25%, up from 1%. In high interest rate environments, investors tend to worry valuations will decrease and have a knock-on impact on returns. Dimensional's analysis of the Fama/French Total US Market Research index and changes to the F...