Lessons from historical Fed hikes

Refreshed 2026 Scorecard

Lessons from historical Fed hikes
(18 Sep)

We re-visit historical Fed first hikes to get a base case roadmap of how asset prices are likely to behave today.

Our conclusions:

Since 1970, the first Fed hike is usually a sign of economic resilience. It rarely causes an immediate recession (at least not within 18 months).

Equities typically experience a “digestive” drawdown after which the bull market resumes. The yield curve generally flattens. Markets price in a Fed that will be responsive to inflation risks.

March 1997 is the only example of a mid-cycle adjustment hike that was “one-and-done”.

All other first hikes were part of a broader hiking cycle.

The pre-1994 and post-1994 experience diverges. The era of greater Fed transparency over the past 30 years has seen markets front-run the policy shifts. It drives a “sell the news” dynamic.  In the post-1994 period, the US dollar tends to peak and gold tends to bottom on the first hike.

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