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Wall Street History
https://www.gofundme.com/s3h2w8
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05/21/2004
1994
Many in the investment community have been pointing to 1994 as a worrisome comparison to the current environment, one in which many seem to be just waiting for the Federal Reserve to commence with its long-awaited tightening program. On February 4, 1994, the Fed began raising the federal funds rate from a cycle low of 3.00% to 6.00% by February 1, 1995 in a series of 7 hikes. But over the course of 94, the Dow Jones Industrial Average rose 5% on a total return basis and the S&P 500 rose 1.3%. True, bond traders and bond fund holders were two parties that got whacked, but when looking at today, perhaps equity investors are overly concerned about future Fed moves. [My true personal opinion, however, is saved for "Week in Review."]
Following, I take a look at the 7 rate hikes, the closing average and point change for the Dow Jones that particular day, and some miscellaneous data points.
1992 On September 4, the Federal Reserve lowered the funds rate to 3.00%
1993 No change in monetary policy
Dow Jones Industrial Average closes the year at 3754
1994
Feb. 4 ..+25 basis points to 3.25%...Dow 3871 (-96 pts.)
Mar. 22 +25 bps to 3.50%................Dow 3862 (-2)
Apr. 18 +25 bps to 3.75%................Dow 3620 (-41)
May 17 +50 bps to 4.25%................Dow 3720 (+49)
Aug. 16...+50 bps to 4.75%.................Dow 3784 (+24)
Nov. 15...+75 bps to 5.50%.................Dow 3826 (-3)
Dow Jones Industrial Average closes the year at 3834
1995
Feb. 1 ..+50 bps to 6.00%.................Dow 3847 (+4)
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Consumer Price Index
1992 2.9% 1993 2.8 1994 2.7 1995 2.5
In other words, what inflation?
2001 1.6% 2002 2.4 2003 1.9 2004 ?
And when you look at the equity environment that followed the Fed tightening of 2/1994 to 2/1995, as measured by the S&P 500 the next five years saw annual returns in excess of 20%, 1995- 1999.
Sources:
Ibbotson Associates 2004 Yearbook Federalreserve.gov Phyllis S. Pierce, The Dow Jones Industrial Averages 1895- 1995
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Wall Street History returns 5/28.
Brian Trumbore
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