By Lewis Krauskopf NEW YORK - The end of the Federal Reserve's rate hiking cycle has generally been a good time to own U.S. stocks, but an uncertain economic outlook and stretched valuationsLee's impacts to be felt as the storm tracks into Atlantic Canada this weekend | SaltWireNEW YORK - The end of the Federal Reserve's rate hiking cycle has generally been a good time to own U.S. stocks, but an uncertain economic outlook and stretched valuations could dampen upside this time around.
Investors with a more bearish view, however, say it is only a matter of time before higher rates tighten economic conditions and bring a downturn. The S&P 500 is already up over 16% this year, aided in part by a U.S. economy that has stayed resilient in the face of higher interest rates. Though most investors believe a recession is unlikely in 2023, a slowdown next year remains a possibility for some market participants. One worrying recession signal has been the inverted Treasury yield curve, a market phenomenon that has preceded past downturns.
"If Wall Street comes to the conclusion that the Fed has ended its rate tightening program, that would at least offer support if not give an additional catalyst to keep working higher," said Sam Stovall, CFRA's chief investment strategist.
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Last Fed hike tends to aid stocks, but some have doubts this timeThe end of the Federal Reserve's rate hiking cycle has generally been a good time to own U.S. stocks, but an uncertain economic outlook and stretched valuations could dampen upside this time around. Many investors believe that policymakers are unlikely to raise rates any further, bringing an end to the central bank's most aggressive monetary policy tightening cycle in decades. If they are right, stocks could be poised for more gains.
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