Federal Reserve 1interest-rate hike, possible trigger for short-term stock selling

An interest-rate hike by the Federal Reserve can trigger stock selling in the short term, and this immediately affects portfolio values and trading sentiment.

At the start of rate-hike cycles, there were many cases in which investors reduced their exposure to risky assets and selling pressure emerged. This trend is because rising bond yields and changes in discount rates are reflected in stock prices.

Historically, after rate increases, the stock market has repeatedly recovered after a certain period of time. In several past cycles, cases were reported in which selling was followed by a rebound.

Changes in interest rates have led to differing reactions by sector. Interest-rate-sensitive sectors such as banks were affected by changes in net interest margins, while growth stocks such as technology shares have at times faced greater downward pressure when interest rates rose and their stock prices were high relative to earnings.

The possibility of another rate hike could interact with other variables such as corporate earnings, inflation indicators, and investor sentiment, leading to a different range of market reactions. The article said that, based on past cases, it is necessary to keep an eye on the order of rate-related announcements and key economic indicators.

In short, the key point is that short-term selling risk and the subsequent recovery are observed at the same time.