Vanguard Economist Says: Fed Rate Hikes Won't Hurt Stock Prices (Yet)
Based on the past 50 years of Fed interest rates, the Fed still has room to hike rates -- and buying the S&P 500 is still a smart choice for long-term investors.
Fed rate hikes may not harm stock prices, according to a Vanguard economist. Rising interest rates can pressure stocks by slowing the economy and moving money away from the stock market into other assets. However, Vanguard economist Joe Davis believes that the economy and stock market are resilient, even with potential additional rate hikes.
Davis stated that before the Fed hikes rates to 5%, which could significantly impact the market, there isn't concern yet. The stock market has an average annual return of 9.98% since 1928, and the Vanguard S&P 500 ETF (VOO) has yielded average annual returns of 13.75% over the past five years. The current fed funds rate of 3.88% is still below the 50-year average rate of 4.64%, and the Fed could hike rates by up to 25 basis points more without significantly harming the market.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
