Why the S&P 500 could still advance after a Fed hike, according to a Wall Street strategist

A Wall Street strategist notes that history offers a counterintuitive lesson: Fed rate hikes do not automatically end equity advances. The investment bank's research examined sector performance in the year following a Federal Reserve interest-rate increase and found that energy and information technology stocks, on average, posted the strongest gains over that twelve-month window.

The takeaway is not that hikes are bullish in themselves. Rather, the finding suggests that the direction of rates matters less than the economic backdrop accompanying them. When the Fed raises rates because growth is firm, corporate earnings have often continued to expand, giving equities room to climb even as borrowing costs rise. The sector pattern also reflects the distinct drivers of energy and technology: commodity cycles and capital spending on one side, innovation and secular demand on the other.

For investors, the relevant question is what the data do not settle. Average outcomes across past cycles can mask wide variation, and sector leadership in any single episode may differ. What to watch: the pace of further policy moves, the trajectory of earnings estimates, and whether credit conditions tighten enough to offset growth. Those variables, more than the hike itself, will likely shape returns.