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S&P 500 Track Record Shines in Higher-Rate Regimes: Taking Stock
By Alexandra Semenova(Bloomberg) -- Tempered expectations for Federal Reserve interest-rate cuts have rattled US stocks the past few weeks. But history shows there may be nothing to fear: If the past is any guide, equity markets are likely to fare well in an era of higher-for-longer interest rates.
During previous periods of elevated bond yields, the S&P 500 Index posted an average price return of 13.9%, compared to an average gain of 6.5% during times rates were falling, according to data from BMO Capital Markets going back to 1990.
The best returns for stocks on a rolling annual basis, the analysis shows, have come when yields rose a moderate amount, by a percentage point or less in that period.
“Low levels of interest rates are not necessarily the best environment for US stock-market performance,” the firm’s chief investment strategist, Brian Belski, said in a note to clients last week.
