Last Fed hike tends to aid stocks, but some have doubts this time

Traders work on the floor of the NYSE in New YorkNEW 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.

More of the kind of generally benign inflation data that has come over the last few months, however, could mean the Fed's quarter-point increase in July was the last in a cycle that shook asset prices last year.

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