- Following the Federal Reserve’s decision to raise interest rates by a quarter-percentage point stocks fell, but then reversed course.
- Historically, stocks have tended to move higher after the Federal Reserve raises rates.
- But basing your investment decision off past market performance is dangerous, said a senior investment research specialist.
In theory, stocks should perform worse when the Federal Reserve raises interest rates.
The common convention is as follows: If the Fed raises what’s known as the Federal Funds rate – the interest rate commercial banks charge each other to borrow money – to compensate banks must raise interest rates on loans to businesses and individuals.