What happens to the stock market when the Fed raises interest rates?

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Stocks fell right after Fed raised interest rates will this continue?

  • 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. 

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