The Fed’s old trick: one hike, then the vibe changes
Citi is basically saying the first Fed rate hike in a tightening cycle can be the market equivalent of someone turning the lights on at a party. U.S. stocks, which usually like cheap money and easy liquidity, tend to stumble. Meanwhile, Japanese and U.K. equities have historically managed to keep their footing — and then some.
Where the grass looks greener
According to the note, relative returns for Japanese and U.K. equities land in the 2% to 3% range on average after that first hike. Not exactly moon-shot stuff, but in market land, that’s enough to make investors start squinting at their domestic-heavy portfolios and wondering whether they’ve been ignoring the neighbors next door.
Why investors should care
This isn’t a prediction that Tokyo or London are suddenly the new Wall Street. It’s more a reminder that rate cycles can reshuffle the winners list:
- U.S. stocks often lose some of their easy-money boost
- Non-U.S. markets can look relatively sturdier
- The first hike in a cycle may matter more than the rest
Big picture: when the Fed starts hiking, the world doesn’t move in lockstep — and sometimes the best seat at the table is somewhere outside the U.S.