Stock performance during periods of rising interest rates

Sources: Vanguard calculations based on data from Bloomberg, St. Louis Federal Reserve database, and Moody’s DataBuffet. All equity calculations represent the S&P 500 Index.

There is a lot of fear among investors right now. We are nine years into a bull market and interest rates are still historically low.  How long can the good times last? The tightening by the Federal Reserve is well underway and the conventional wisdom is that stocks perform poorly during a rising rate environment. What does the historical data show?

Vanguard recently posted about this on their blog for institutional investors. Here’s a quote from the post –

…in the 11 periods of rising rates we looked at over the past 50 years, stock market returns were positive in all but one of them. And even including the –15% return for the period in 1974, the return of stocks across those periods was in line with the 10% average for stocks from 1925 through 2017.

This is great news for stock investors, especially those near retirement age!