Market Insider

Why Fed rate hikes may not hurt stocks—this time

Trader on the floor of the New York Stock Exchange.
Adam Jeffery | CNBC

Despite the hand wringing about higher rates, stocks could actually rise when the Federal Reserve embarks on liftoff from its zero- rate policy, especially if it keeps the increases gradual.

The conventional thinking holds that stocks may not have an immediate reaction, but the market could pull back after the first few hikes. However, a study by Ned Davis Research found that a slower pace of hiking could change that outlook for equities and the market could continue to rise, if the Fed hikes at the slow pace it promises.

The average gain for the S&P 500 one year later was 10.8 percent during slow cycles, compared with a decline of 2.7 percent in fast hiking cycles, according to the study.