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Kensho Stats

Hawkish Fed minutes could lift market further

An eagle sculpture stands on the facade of the Marriner S. Eccles Federal Reserve building in Washington, D.C.
Andrew Harrer | Bloomberg | Getty Images
An eagle sculpture stands on the facade of the Marriner S. Eccles Federal Reserve building in Washington, D.C.

At its last meeting in July, Federal Reserve officials agreed that the economy was on more solid footing and risks to the outlook had abated. In short, they left the door open for an interest rate hike this year.

So when the minutes from that meeting are released Wednesday, there's a good chance they'll be hawkish.

We used Kensho to look for the best trades one week after Fed minutes are released that indicate the central bank is getting ready to raise rates. Since 2013, there have been 11 such occasions.


History suggests that markets take the news in stride — perhaps as investors feel that an improving economy can withstand higher rates. The S&P 500 has traded positive in every instance but one and gained more than 1 percent on average. However, some areas of the market do better than others.

The best-performing sectors have been cyclicals like materials, technology and consumer discretionary. The financial sector has also outperformed as rising rates would help its net interest margins.

Meanwhile, defensive sectors tend to underperform when hawkish Fed minutes are released. Rising rates hurt the case for holding low-growth utility and consumer staple stocks.

Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.