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Kensho Stats

Stocks often stumble after second rate hike, history shows

Janet Yellen NYSE

The Federal Reserve's decision to increase interest rates for the second time in a decade caused stocks to tumble on Wednesday. The losses could be just beginning, if history is any guide.

Using hedge fund analytics tool Kensho, CNBC PRO ran a study to determine the market's performance after a second rate increase during the last four Fed rate-hike cycles.

Here's how the market and certain sectors did one, three and six months after a second rate rise.


The S&P 500 posted an average decline of nearly 8 percent one month after the Fed's second rate hike, according to Kensho. The worst-performing S&P sector was materials, posting an average loss of nearly 6 percent. Other groups such as technology and consumer discretionary also underperformed.



Three months after a second rate hike, the market remained weak, on average. The worst-performing sector was utilities, falling an average of 3 percent. Despite the overall market losses, industrials and materials managed to post small gains, up on average 1 percent, according to Kensho.


Six months after a second rate hike, stocks were still lower, on average. The worst-performing sector was financials, posting an average loss of 3 percent compared with a decline of 2.5 percent for the S&P 500 index, according to Kensho. Other groups such as consumer staples and industrials were also down.

To be sure, the market crashed shortly after a second rate hike in 1987 so that could be skewing the average figures lower a bit. But the data still shows how stocks are vulnerable when the Fed sets out on a rate-hiking cycle.

— CNBC's John Melloy contributed to this story.

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