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Markets are bracing for a rate hike. So, how do US stocks usually behave following the first hike of a Fed tightening cycle? The S&P 500 has declined by an average of -4.0% over the 6 weeks following the first Fed rate hike of a cycle across 7 such episodes since 1988. Subsequently, however, stocks recovered all of those losses over the next 5-6 weeks on average. Then, in the 6 months following the first hike, the S&P 500 returned +4.0% on average. After 12 months, the S&P 500’s average gain surged to +9.0%, with positive returns occurring in every episode except 2022. Fed rate hikes have historically been great buying opportunities.