Investment Strategies: From Wall Street to Main Street Hingham MA

By Craig Hartnett Hingham MA

The Federal Open Market Committee (“FOMC”) will announce whether it raised policy interest rates at it’s 2 day meeting that concludes December 16th.

The FOMC had made statements preceding the meeting indicating their desire to undertake the 1st policy interest rate increase in 9 years given the later stage of the recovery in the U.S. economy.

Although the stock market has risen the last couple trading sessions, rebounding from the recent decline. increases in policy interest rates are not positive for the U.S. economy in terms of future growth and employment gains or the equity markets though there is a lagged negative effect.

However, since 1955 there have been 10 bear markets in U.S. stocks. All 10 bear markets occurred after the Federal Reserve raised interest rates by at least 1.37%. These tightening cycles, where there are sequential increases in interest rates by the Federal Reserve, caused either a recession (80%) or an economic downturn (20%). Leading into the two bear markets that did not precede a recession, the Federal Reserve raised interest rates by a much more modest amount. Interestingly, these two bear markets where much shorter, averaging 5 months as compared to 16 months for the eight bear markets that did precede an official recession.

This potential.25% increase will not in and of itself cause a recession and using history as a guide, a subsequent bear market.

This is meant to provide perspectives on three investment strategies and not a recommendation from Craig Hartnett to investors in Hingham MA and the South Shore community.