What Usually Happens to Stocks When the Fed Raises Rates?
The S&P 500, a basket of 500 large U.S. stocks, was higher one year after the first hike in 81% of 21 past times the Fed raised rates. That count was published Sept. 14, 2026 MarketWatch. Raising means the Fed lifted rates, often to fight inflation.
Rate cuts have also lined up with stock gains. During Federal Reserve interest-rate cut periods, the Dow gained 23%, the S&P 500 gained 21% and the Nasdaq rose 32% MarketWatch. That tally is history, not a forecast. It shows what happened, not results sorted by inflation, starting stock prices or slack in jobs.
Rate decisions follow a set routine. The FOMC, the Fed group that sets rates, holds eight regularly scheduled meetings each year and other meetings as needed Federal Reserve. The Committee set a near-zero target range for the federal funds rate, the bank rate that shapes loans and savings, in late 2008 Federal Reserve. It kept raising that range after late 2022 but raised more slowly than in late 2022 Federal Reserve. The 1994-1995 hikes are remembered as a rare soft landing, like landing a plane gently, when inflation cooled without a recession Forbes.
Old rates can be checked on the same basis. FRED has daily data for 10-Year Treasury Constant Maturity from January 2, 1962 to September 14, 2026, and monthly data from April 1953 to August 2026 FRED. Yield means yearly interest. The FRED DGS10 series estimates the 10-year yield from the average yields of Treasury securities with different maturities from the Treasury yield curve FRED. The 30-year series stopped on February 18, 2002 and started again on February 9, 2006 FRED.
The broader context here is that averages can mislead. An 81% hit rate says nothing about size of gains, how far stocks fell first, or volatility. Hiking to fight inflation when long rates are flat or below short rates hits company values and borrowing costs differently than early hiking when long-term hopes stay steady. History favors patience. It does not replace checking profits and rate risk.
Looking at what this means for using the numbers, tech led rate cuts. Growth stocks move more when rates shift, and the extra pay for holding stocks shrinks when pressure lifts. But that sample mixes safety cuts, recession cuts and post-crisis normalization. Soft landings are rare. Holding up 1994-1995 shows cooling prices without shrinking growth is the exception, not the rule.
In my view, how we measure rates matters as much as returns. The steady maturity numbers smooth quirks in single bonds by fitting a curve, which helps compare over time but can hide stress in one bond. The gap from 2002 to 2006 breaks long models of term premium or plans to pay future bills. Anyone studying hikes and cuts across those FRED years must leave that gap open, not fill it in.
