Long pauses between Fed actions are historically good for stocks

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Investors are deliberating when the Federal Reserve will start to lower rates, but the current pause could actually be a blessing in disguise for equities.

It turns out that a long pause between Federal Reserve rate actions is historically good for stocks, according to LPL Financial. Investors have been anxiously awaiting any indication as to when the Fed will start to lower interest rates, as the central bank continues to hold steady amid reports of sticky inflation and a resilient economy. Markets are currently pricing in two quarter percentage point rate cuts in 2024, starting in September, according to the CME FedWatch Tool .

"Long pauses are typically good for stocks, and the gains achieved since the Fed's last hike in July 2023 are consistent with recent history," said Jeff Buchbinder, chief equity strategist at LPL Financial. "The pace and rise of the S & P 500 during that time are in line with what we are seeing now." .

 

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