The Impact of the Federal Reserve Raises the Interest Rates on the US Stock Market Index: The Dynamic Perspective

Abstract

In order to battle growing inflation, the Federal Reserve raised interest rates in March 2022 for the first time since 2018. This action signals the conclusion of the Federal Reserve's accommodative monetary policy adopted during the pandemic, coinciding with significant inflationary trends in the United States. One of the main focuses that this may bring is the effect on stock price. This article will use past data on NASDAQ stock prices to forecast future trends and will discuss the analysis. At the end, the research finds that Feds policy has let NASDAQ index decrease than expected trends in a long-term perspective. This suggests that the Fed's policy may have a more pronounced impact on long-term trends rather than short-term fluctuations. It also implies that investors should adopt a strategic, long-term approach to their investments, rather than reacting to short-term market noise. Investors may also consider implementing risk management strategies, including stop-loss orders and options contracts, to protect against sudden market downturns that may result from interest rate hikes.