The Federal Reserve Just Raised Interest Rates for the First Time Since 2023. Here's What History Says Happens in the Stock Market Next.

The Federal Reserve raised the federal funds rate by 25 basis points under Chairman Kevin Warsh, marking the first hike since 2023 as inflation pressures persist. Historical data shows rate-hiking cycles have produced an average 14% drawdown in the S&P 500 within 12 months, though equities typically recover with an average 6% gain over the full year.

Growth stocks and debt-heavy companies face the steepest pressure from tighter monetary policy. The playbook from previous cycles suggests temporary pain before the bull market resumes, assuming corporate earnings hold up.

For SCHW, SCHWPD, and SCHWPJ, rising rates present a double-edged scenario. Higher rates can boost net interest income on client cash balances, but client activity often slows during volatile drawdown periods. The preferred shares SCHWPD and SCHWPJ may see price pressure as yields reset across fixed-income markets.