A Look at What Happened in 2018 When the Fed Raised Interest Rates Four Times

By Pam Martens and Russ Martens: January 24, 2022 ~

Bloomberg News ran this headline over the weekend: “U.S. Stocks Historically Deliver Strong Gains in Fed Hike Cycles.”

For a reminder to our readers of what happened in 2018, the last time the Fed gently tapped its foot on the brake four times, we’ve listed below some of the headlines we ran in 2018 at Wall Street On Parade. The Fed was not at all aggressive with rate hikes in 2018: it gently raised the Fed Funds rate by a quarter of a point on March 22, June 14, September 27 and December 20.

But that was enough to deeply unsettle markets – particularly the megabanks on Wall Street. Consider these headlines and the details in the articles:

Yesterday’s Stock Market Plunge Saw Indiscriminate Dumping of Stocks

Wall Street Banks Tank Yesterday as Contagion Threat Grows

The Fed Gives Wall Street Banks Okay to Prop Up Their Stock Prices

Why Did Trump Just Bully the Federal Reserve on Interest Rates

The S&P 500 closed the year with a loss of 6.24 percent while the Dow Jones Industrial Average gave up 5.6 percent. Those were the largest losses in a decade and it was from just four gentle taps on the brake.

But the full year losses hardly capture the brutal sell off in the last quarter of the year. The S&P 500 plunged 13.97 percent while the Dow Jones Industrial Average lost 11.8 percent. The Nasdaq went into a bungee dive in the fourth quarter, giving up 17.5 percent. The Nasdaq closed the full year down 3.9 percent.

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