Markets have been volatile to start 2022, with the S&P declining almost -10%, and growth stocks down even more. One factor driving this volatility is the announcement from Fed Chair Powell that they expect to raise the interest rate three times this year. This week’s chart of the week looks at the S&P 500 around historical rate hiking cycles. As the chart illustrates, markets do tend to recover after the initial period of volatility, but the strength of the recovery will depend on how quickly the Fed continues to tighten (raise rates), and where inflation comes in.
Source: Bloomberg, UBS