What 21 Fed Hiking Cycles Say About Stocks a Year Later
The S&P 500, a basket of large U.S. stocks, was higher 12 months after the first hike in 81% of 21 past Federal Reserve tightening cycles. That hit rate was published Sept. 14, 2026 MarketWatch. Tightening means the Fed is raising rates, usually to fight inflation.
Rate cuts have also lined up with 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 in those episodes, not results sorted by inflation, starting valuation or slack in the job market.
The setup for rate moves is fixed. The FOMC, the Fed committee 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 overnight bank rate behind loans and savings, in late 2008 Federal Reserve. It kept raising that range after late 2022 while raising more slowly than in late 2022 Federal Reserve. The 1994-1995 tightening cycle is widely remembered as a rare soft landing, when inflation cooled without a recession Forbes.
Rate history can be checked on the same basis over time. FRED offers 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 taken from the Treasury yield curve FRED. The 30-year Treasury constant maturity series was discontinued on February 18, 2002 and reintroduced on February 9, 2006 FRED.
The broader context here is that averages hide the reason for the hike. An 81% hit rate says nothing about size of gains, how far stocks fell first, or volatility. Hiking to fight inflation when the curve is flat or inverted moves earnings multiples, what investors pay for profit, and credit spreads, the extra cost to borrow, differently than early precautionary hiking when long-term expectations stay anchored. Base rates argue for patience. They do not replace study of profits and rate sensitivity.
Looking at what this means for using the data, leadership in cut periods matters. Technology stocks with high beta led. That fits duration effects in growth stocks and shrinking equity risk premia, the extra return for holding stocks, when restraints lift. But the sample mixes insurance cuts, recession cuts and post-crisis normalization. Soft landings are rare. Citing 1994-1995 as the exception is a reminder that cooling prices without shrinking growth is the unusual result, not the typical one.
In my view, measurement matters as much as returns. Constant-maturity figures smooth quirks in current bonds by fitting the curve, which helps compare over time but can hide stress in a single bond. The 2002 to 2006 gap in the 30-year series breaks long models of term premium or liability matching. Anyone backtesting hikes and cuts across those FRED windows must leave that gap open rather than fill it in.
