Fed History Lesson – Looking Back on Market Moves When The Fed Started To Tighten

November 2, 2021

This is an excerpt from a note Peter Boockvar, Chief Investment Officer at Bleakley Advisory Group sent to  his subscribers at The Boock Report website. Peter does a great job of looking back over the past 12 years to summarize how the markets reacted during a Fed tightening process.


A big thank you goes out to Peter for giving me the go ahead to re-post this for all of you.


Click here to visit Peter’s site to keep up to date on his daily notes on key market and economic data and market moves.




I’m reposting this history lesson I wrote a few months ago ahead of tomorrow’s FOMC announcement which has been pretty well telegraphed with the taper and its pace. It just lays out the stock market behavior around tightening periods since 2010.


Outside of the August 2015 selloff related to the Chinese yuan modest devaluation and the Covid induced crash, every notable correction in stocks surrounded a change Fed policy toward tightening. QE1 ended on March 30th 2010. We rallied for the next 3 weeks and then proceeded to fall by 16% from high close to low close in early July. On June 30th 2011 QE2 ended. We held in for the next 3 weeks and then sold off by 18% into early October. Around the time QE3 was ending in the fall of 2014, the S&P 500 was down as much as 10% intraday into mid October. Yellen finally got around to hiking rates in December 2015 after 7 years of zero. We rallied for 2 weeks and then sold off by 12% into mid February 2016. Yellen didn’t hike rates again until December 2016 but 2017 was saved by the hopes of the corporate tax cut which was signed at year end 2017. After that excitement and another rate hike in December 2017, the vol trade blew up in January/February 2018 with a 10% correction. Fast forward to Q4 2018 and we all know what happened when Powell kept hiking and the S&P 500 fell 20%.


    Nov 02, 2021 02:55 AM

    1928-29 hikes unmentioned.
    Nor the fate of Altair IV.

    Nov 02, 2021 02:42 AM

    Nice to know that historically you get some time to plan your short…that takes a lot of hesitancy out of shorting into strength…thank you…another great guest…glta