Historical data tells you that interest rate hikes can't crush US stocks!

Investors in US stocks are always fearful.

The market climate has changed dramatically since earlier this year, and individual investors are often fearful. They expect the stock price to fall and are worried that the valuation will be too high.

These fears have all been amplified, but another overinterpreted market panic is plaguing investors.

Again, this may seem scary, but it really isn't.

Let's take a look at the analysis:

The Federal Reserve recently began a process to reduce its “monetary easing” policy.

Last month, the Federal Reserve announced that it would begin to cut back on its bond-buying program, and it has already put the first step in place. The Federal Reserve has also been hinting that interest rate hikes may come sooner than expected.

Earlier this year, people didn't worry about interest rate hikes at all. However, as 2021 comes to an end, interest rate hikes have become a hot topic again, and there are plenty of reasons:

Low interest rates have boosted the current bull market.

Because in an environment with low interest rates, there is not much competitive pressure on the stock market, there is basically no interest on savings, and the yield on bonds is almost zero. Therefore, investors must consider stocks if they want to make money in the current low interest rate environment.

However, when interest rate hikes begin, competitive pressure on stocks will begin to increase, and investors will have more options to earn interest on capital at that time.

So everyone is watching the Fed's next move.

According to federal funds futures contracts, options traders expect two rate hikes in 2022 and three more in 2023.

In other words, most people think this low interest rate environment won't last long, but does that mean it's time to consider selling stocks?

The answer is No, you might be surprised by this answer, but at least in the short term.

Let's take a look at the impact of interest rate hikes in history:

The Federal Reserve began raising interest rates in June 1999. Before the S&P 500 peaked in September 2000, the Federal Reserve eventually raised interest rates 5 more times. In these 15 months, the S&P 500 index still rose 12%.

The Federal Reserve's first rate hike did not kill the bull market. Admittedly, the market eventually crashed, but until then, the market still had more room to rise, and investors who left the market early due to concerns also missed out on these gains.

The same situation occurred before the 2008 financial crisis. The Federal Reserve raised interest rates in June 2004, but the US stock market was far from peaking at that time. Over the next few years, the US stock market continued to soar.

There were a total of 17 interest rate hikes from June 2004 to mid-2006, but the market continued to bullish. Before the stock market peaked in October 2007, investors could theoretically earn 46%.

As I would like to see, the bull market is likely to continue even if the Federal Reserve starts to raise interest rates.

Although the S&P 500 is currently at an all-time high, the market bubble is simply not as severe as it was earlier this year.

Worries have begun to appear, but the S&P 500 is still in a strong upward trend. As long as the good times continue, we should consider and seize them. So simply put: stay bullish.

A brief analysis of additional individual stocks:

Selling paint may be boring, but the business is booming

The stock shared below isn't surprising, but it can bring stable returns that investors love.

Old readers probably know that investing in some “uninteresting” businesses is a good deal. Although they may not be part of popular tech trends, industries such as uniforms and garbage collection are always in demand, and these industries can provide rich returns in the long run. The company mentioned below is a great example.

Sherwin (SHW) is a $90 billion paint manufacturer. The company was founded in 1866, and to this day, it is doing what it does best. From people's common DIY projects to the current boom in construction and decoration, people need to use paint supplies. As a result, whether in good times or adversity, Sherwin-Williams, a long-standing company, has maintained a strong development momentum. Despite supply chain challenges, Sherman's net sales in the last quarter were still close to US$5.2 billion, up 0.5% year over year.

As shown in the chart below, Sherwin's stock price has soared over the past 5 years. During this period, the stock price rose by more than 280%, and recently hit a record high. (This is not an investment reference, please pay attention to risk when investing)

Analyst: Chris Igou

Compiled by Samantha