What Happens to the Stock Market After the Fed Stops Raising Interest Rates?

As expected, the Fed raised US interest rates by 0.25 percentage points to a 5-5.25% target.

What comes next? Just like your Friday night plans, Fed Chair Jerome Powell is keeping his options open on what to do for the following meeting.

The best hits from Jerome Powell’s latest post-meeting conference album:

• Unemployment: He believes that unemployment won’t surge as much as it has in past cycles of interest rate hikess.
• Recession odds: It’s more likely than not that a recession will be avoided.
• Raising rates: Decision made on a meeting-by-meeting basis — “but we are prepared to do more.”
• Lowering rates: In a world where inflation isn’t coming down that quickly, “it would not be appropriate” to cut rates in the coming months.

What does this mean for markets?

If this were the last hike, the 5.25% peak would be lower than the 6% that was expected before the recent bank collapses. Markets tumbled after the meeting, but here at the Joe, we invest for the long term.

On average, stock market returns are positive in the 12 months following Fed pauses, with the exception of 1999 during the dot-com bubble.

When does the Fed drop their next hit? When they jam again at their June 13-14 meeting.