FXstreet

The market went through an adjustment period, with average returns falling from 14 percent before the rate hike to 2.6 percent 250 days afterward. By 500 days, returns returned to their pre-hike average of around 14 percent.



Chair Yellen announced that, for the first time in seven years, easy money will become slightly less easy. The target rate will be set at between 0.25 and 0.50 percent, which doesn’t sound like much, but it’s important. Plus, this comes at a time when fellow industrialized nations and economic areas around the globe are considering further monetary easing measures.



The question on investors’ minds, though, is what effect they might have on their investments. To answer this, CLSA analyzed what happened to the U.S. dollar and stocks in the S&P 500 Index 60 trading days before and after the initial rate hike in past cycles and then calculated the averages. It’s important to keep in mind that, aside from rising interest rates, a multitude of unique factors—from geopolitics to economic conditions to the weather—played roles in influencing the outcomes. Nevertheless, CLSA’s research is instructive.

The group finds that, on average, the U.S. dollar peaked 10 trading days before the rate hike, and then afterward slid lower for four to five weeks. This created an agreeable climate for gold and other precious metals and commodities, as their prices typically share an inverse relationship with the dollar.

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