stock market

When the Federal Reserve (Fed) raises interest rates, it’s viewed as a sign of strength for the U.S. economy and a signal that inflation will continue to rise in the coming months. A rate hike also impacts stock market investments by increasing the cost of borrowing money and favoring safer, fixed-income investments like bonds over riskier stocks. However, while raising interest rates is usually considered negative for stocks because it increases the cost of investing in them, historically speaking this has had little impact on long-term returns. In fact, many financial advisors view a rate hike as positive for their clients—especially those who are heavily invested in riskier areas like small company stocks or emerging markets ETFs—because it makes them less susceptible to downturns in those sectors.