Fed may hold interest rates higher for longer, but it may not be a bad thing for stocks

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Some investors have been worried that the Federal Reserve's vision to keep its key policy rate elevated for longer than previously anticipated would darken...

Some investors are worried that the Federal Reserve’s intention to keep its policy interest rate elevated for longer will darken the outlook for risk assets, but based on historical data, such periods are not necessarily bad for stocks, according to analysts at Jefferies.

In particular, the current cycle of stable, elevated interest rates is similar to the one in 1995 in terms of the magnitude and the pace of Fed’s rate hikes, the analysts said. Meanwhile, during another cycle from 2016 to 2017, when interest rates remained high and stable, equities rallied for the first 10 months, recording a return of 20%, before giving up some gains in the last two months and ending the cycle with a 16% gain.

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