You may have heard the phrase, “three steps and a stumble.” It means that when the Fed raises rates three times in a row, a market stumble is likely to follow.
Following is a visual look at that rule:
- The S’s in the chart mark the third consecutive rate hike
- Note how the hikes almost always precede a new recession
- Note the current signal is a sell or “S” and
- Note the DJIA has declined a median of 17.9% from sell signals to bear market bottoms