What to expect from the market in the period leading up to a Fed rate hike

The Federal Reserve kept rates unchanged in their last meeting earlier this month, and at the same time, have been indicating a hike could be in the cards for September.

According to the CME FedWatch Tool, there is a greater than 90 percent chance that the Fed will increase interest rates at the next FOMC meeting, set to take place on September 26.

Since the start of the current Fed rate hike cycle which began in December 2015, the month leading up to a rate hike tends to be a bullish stretch for the S&P 500 and the Dow.

In that period, both Indices average gains of more than 2 percent, trading positively 86 percent of the time.

Among the top performing sectors in the month leading up to a rate hike, financials outperform, up an average of 3 percent – a positive trade 71 percent of the time.

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