Investment Institute
Macroeconomic Research

Equity market compass in the Fed’s hiking trail

  • 11 July 2022 (7 min read)

Key points:

  • Focus on the length of the cycle: We note that long hiking cycles of more than 15 months hit equities harder than short cycles, with an underperformance of around 3%
  • We can learn from the slope of the curve: We observe that it is only six months after the first hike that the long cycles truly distinguish themselves from short cycles through yield curve flattening
  • Dividend yield, value and quality: Value, dividend yield and quality in terms of styles seem to potentially offer the best mix of forward performance and hit ratio during rate hike cycles.
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