What happens when the Fed stops hiking? Well, Stocks go up.

Stocks in Asia were mostly higher Monday despite a slightly weaker China business sentiment survey and a surprising oil production cut by OPEC over the weekend that has pushed oil futures up 5%

What happens when the Fed stops hiking? Well, Stocks go up.

As we look back at a volatile March, one of the important things to fall out of the bank’s crisis is that the Fed has now signalled that there is likely only one more 25bp rate hike remaining in its year-long-plus rate hiking cycle.

US equities have generally rallied in the months following the end of past Fed hiking cycles, with the S&P 500 posting an average 3-month return of +8% and rising in 5 of 6 episodes since 1982. Equities performed poorly when the economy entered recession near the end of tightening cycles, so that is something to remember if the tape prints, “ I told you so,”?

Key to watch: valuation and earnings each face specific headwinds that may prevent near-term returns from being as strong as usual.