Tags: Stovall | Gold | Fed | rate

MarketWatch's Gold: Fed Rate Hikes Don't Hurt Stocks Long Term

By    |   Wednesday, 24 September 2014 01:54 PM

Many economists expect the Federal Reserve to begin raising interest rates around the middle of next year, and many investors are scared that will put an end to the five-year-old bull market in stocks.

But fear not, says MarketWatch columnist Howard Gold.  History suggests that while stocks will suffer in the short run, they will rebound in the long run.

Looking back to 1946, in 13 of the 16 instances when the Fed lifted rates, the S&P 500 index endured a decline of at least 5 percent—16 percent on average—in the six months before the hikes began, Sam Stovall, S&P Capital IQ equity strategist, told Gold.

But within six months after the first rate increase, the S&P 500 "was back in the black and up an average 1.3 percent," Stovall wrote last week.

Stovall predicts the S&P 500 will reach 2,200 in the next year, according to Gold.

"Historically in a rising interest rate environment, technology, energy and materials are your best performers because it's later in the cycle and inflation pressures build," Stovall told Gold.

Meanwhile, Thomas Lee, former chief equity strategist at JPMorgan Chase, told CNBC that he sees the Dow Jones Industrial Average and S&P 500 rising about 5 percent by Dec. 31, thanks to economic strength and increased participation by previously reluctant investors.

Stocks climbed 10 percent during the same period last year. "We've got, I think, a much stronger economic outlook today. And I think a similar level of underinvestment," said Lee, who opened FundStrat Global Advisors last week.

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Many economists expect the Federal Reserve to begin raising interest rates around the middle of next year, and many investors are scared that will put an end to the five-year-old bull market in stocks.
Stovall, Gold, Fed, rate
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2014-54-24
Wednesday, 24 September 2014 01:54 PM
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