Rate Hikes Are Good News For Stocks

It's no surprise that the prospect of a Federal Reserve rate hike worries stock investors. The Fed's unprecedented economic stimulus has in large part driven a surge in stock prices since 2009. The central bank has bought trillions of dollars of bonds and kept short-term interest rates close to zero. That's allowed businesses and consumers to refinance their debt at lower rates, freeing up cash to spend. But if history is a guide, investors have nothing to fear.

In the nine instances since 1955 that the Fed has started raising rates after a recession, the Standard & Poor's 500 index has risen by an average of 58 percent between the first hike and the peak of the market, according to LPL Financial, an independent broker-dealer based in Boston. The Fed is set to end its bond purchases in October and most economists expect the first short-term rate hike by mid-2015. These early increases, analysts say, are unlikely to derail the current bull market for stocks, because the Fed would be raising rates in response to a growing economy. Manufacturing expanded in August at the strongest pace in more than three years. Hiring is also picking up, along with consumer confidence.

Source: abc27.com

Related Articles:
- 4 Higher Yielding Basic Materials Stocks With Growing Dividends
- 7 Dividend Growth Stocks That Could Make You Wealthy
- 12 High-Yield Managed Distribution Policy Funds
- The 2013 Elite Dividend Stocks List
- 6 High-Yield Dividend Achievers With 25 Years of Increases