U.S. Stocks on Wrong Side of History With Rate Rise in Sight
Can Stocks Keep on Running With a Fed Rate Hike?
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Never before has a rally in the U.S. stock market gone on this long without a Federal Reserve interest-rate increase. Expecting valuations to keep rising once one comes is asking too much, if history is any guide.
While Standard & Poor’s 500 Index price-earnings ratios are far from records, they’ve shown no ability to expand after the U.S. central bank starts raising rates, according to data compiled by Goldman Sachs Group Inc. and Bloomberg. In the quarter after the last 12 tightening cycles began, P/Es contracted by an average of 7.2 percent.