Barclays studies how the S&P 500 reacts when easing cycles reverse

Barclays analyzed historical periods when the Federal Reserve ended an easing cycle and later resumed rate hikes, focusing on implications for the S&P 500. The bank found that the buildup to a policy reversal has usually not been a major drag on returns over the six months before the first hike. However, once the Fed begins hiking again, equity performance has tended to soften, with the S&P 500 often posting low-single-digit downside in the following two weeks to three months. The note comes as markets increasingly price in a renewed hiking cycle by year-end after stronger inflation data. Overall, the article suggests near-term resilience for the index before the first hike, but elevated pullback risk afterward.