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Tag Archives: typically
The stock market typically bottoms before the end of a Fed rate-hike cycle. Here’s how to make that bet pay off.
A lot of money can be made betting on when the Federal Reserve will “pivot” — that is, take its foot at least partially off the rate-hike gas pedal. Yet a lot of money can also be lost, as we saw on August 26 when the Dow Jones Industrial Average
DJIA,
-0.57%
lost more than 1,000 points after Fed Chair Jerome Powell dashed hopes that the Fed’s pivot had begun in July.
So it’s helpful to review past rate-hike cycles to see how investors fared when trying to anticipate when those cycles came to an end.
To do that, I focused on the six distinct rate-hike cycles since the Fed began specifically targeting the Fed funds rate. The table below reports how many days prior to the end of those cycles that the stock market hit its low. (Specifically, I focused on a six-month window prior to the end of each cycle, and determined when within that window the S&P 500
SPX,
-0.67%
hit its low.)
| Start of rate-hike cycle | End of rate hike cycle | Days in advance of cycle’s end that S&P 500 hit its low | S&P 500’s gain from low to end of rate hike cycle | S&P 500’s gain 3 months after market’s low | S&P 500’s gain 6 months after market’s low | S&P 500’s gain 12 months after market’s low |
| 30-Mar-83 | 9-Aug-84 | 16 | +12.0% | +13.2% | +18.7% | +30.3% |
| 4-Jan-87 | 24-Feb-89 | 176 | +11.1% | +5.5% | +12.7% | +36.0% |
| 3-Feb-94 | 1-Feb-95 | 55 | +5.6% | +9.9% | +18.5% | +38.3% |
| 29-Jun-99 | 16-May-00 | 81 | +10.0% | +3.6% | +13.1% | -4.9% |
| 29-Jun-04 | 29-Jun-06 | 16 | +4.0% | +7.3% | +15.5% | +24.5% |
| 15-Dec-15 | 20-Dec-18 | 0 | +0.0% | +13.4% | +19.4% | +30.6% |
| AVERAGE | 57 | +7.1% | +8.8% | +16.3% | +25.8% |
As you can see, the market hit its low an average of 57 days prior to the end of the Fed’s rate-hike cycle — about two months. Yet notice also that there is quite a range, from no lead time at one extreme to almost the entire six-month window on which I focused. Given that it’s hard to know when the Fed will actually begin to pivot, this wide range illustrates the uncertainty and risk associated with trying to reinvest in stocks in anticipation of a pivot.
Nevertheless, the table also shows that there are hefty gains to be had if you get it even partially right. For example, the S&P 500 gained an average of 7.1% over the period between the market’s pre-pivot low and the actual end of the rate-hike cycle. That’s an impressive return for a two-month period. Furthermore, the average gain over the six months following the pre-pivot low is a strong 16.3%, and over the 12 months following that low it is 25.8%.
How should you play this high-risk/high-reward situation? One way is to dollar-cost average up to whatever is your desired equity exposure. For example, you could divide into five tranches the total amount you want to eventually put back into the stock market, and invest each tranche in equities at the end of the next five calendar quarters. If you followed this approach — and it is just one of many possible ones — you’d be back to your target equity exposure by the beginning of 2024.
Such an approach won’t get you into stocks at the exact pre-pivot low, but hoping for that is a delusion. Yet the approach should get you an average buy-in price that is better than waiting. It should also protect you from days like August 26, when the market punished those who bet that the Fed had already started to pivot.
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com
More: Learn how to shake up your financial routine at the Best New Ideas in Money Festival on Sept. 21 and Sept. 22 in New York. Join Carrie Schwab, president of the Charles Schwab Foundation.
Drug typically used in cancer therapy emerges as potential anti-aging treatment
Scientists say rapamycin, also used after undergoing an organ transplant, is capable of extending life with only brief use
COLOGNE, Germany — A drug that patients normally take during cancer therapy may have the power to increase the human lifespan, a new study reveals. Researchers in Germany say rapamycin can cause side-effects when patients take it as a lifelong anti-aging treatment. However, their new report finds even brief usage can have a dramatic impact on longevity while cutting down on side-effects.
Rapamycin is a cell growth inhibitor and immunosuppressant that people normally take while undergoing cancer treatment or after receiving an organ transplant. A team from the Max Planck Institute for Biology of Ageing, however, notes that the drug is also a promising anti-aging formula. Studies involving animals have found that low doses of rapamycin can extend life by preventing age-related changes in the intestines. Until now, however, scientists have looked at this drug as something patients would need to take for the rest of their lives.
“At the doses used clinically, rapamycin can have undesirable side-effects, but for the use of the drug in the prevention of age-related decline, these need to be absent or minimal. Therefore, we wanted to find out when and how long we need to give rapamycin in order to achieve the same effects as lifelong treatment,” explains study lead investigator Dr. Paula Juricic in a university release.
Patients may only need weeks or months of rapamycin treatment
The new study tested rapamycin in two short-term experiments using fruit flies and lab mice. The first treated young, adult flies for two weeks. The second treated young, adult mice (3 months-old) for a three-month period. In both experiments, the team found that rapamycin had a beneficial effect on the health of each animal’s intestines during middle age.
“These brief drug treatments in early adulthood produced just as strong protection as continuous treatment started at the same time. We also found that the rapamycin treatment had the strongest and best effects when given in early life as compared to middle age. When the flies were treated with rapamycin in late life, on the other hand, it had no effects at all. So, the rapamycin memory is activated primarily in early adulthood,” explains Dr. Thomas Leech, co-author of the paper.
“We have found a way to circumvent the need for chronic, long-term rapamycin intake, so it could be more practical to apply in humans,” adds co-author Dr. Yu-Xuan Lu.
“It will be important to discover whether it is possible to achieve the geroprotective effects of rapamycin in mice and in humans with treatment starting later in life, since ideally the period of treatment should be minimized. It may be possible also to use intermittent dosing. This study has opened new doors, but also raised many new questions,” concludes senior author Prof. Linda Partridge.
The study is published in the journal Nature Aging.
