Future monetary tightening and the prospects for US equities

We doubt that the US stock market will fare well in the run-up to, and during the early stages of, the next tightening of monetary policy. Admittedly, this would buck the trend since 1970, when, on average, the market peaked after first rate hike. And equities also performed strongly during an earlier and more relevant period in the Fed’s history in the 1940-50s. However, the valuation of the stock market is much higher today and there are other reasons to be cautious.