The day is finally here. Later this afternoon, the Federal Reserve will announce its first rate hike in quite some time.
Investors have been fearful of a rate hike for several months now, part of the reason why U.S. stocks have been plunging in 2022.
Of course, worries of a recession due to spiking inflation and a war in Eastern Europe aren’t helping sentiment.
So far, stocks are rallying ahead of the event. The S&P 500 is up 1.6% on the day, while the Nasdaq Composite is up 2.6%. That follows yesterday’s rallies of 2.1% and 2.9%, respectively.
Despite investors’ gut feeling, stocks can and do rally in a rising rate environment. At least historically that is the case.
The concern now is that the market is using up all of its buying power — is it just a short-covering rally ahead of the Fed? — ahead of the event. Let’s look at the key levels.
