With the Federal Reserve on track to hike rates three to four times this year, everyone is worried this tightening process will spook the markets.

But, according to the Chicago Fed’s National Financial Conditions Index, it hasn’t had an impact yet.

Take a look:

According to the National Financial Conditions Index, the Federal Reserve's tightening process hasn’t had an impact on the markets yet.

As you can see, spikes in the index correlate to the gray-shaded areas, which mark economic recessions. The zero line (the black horizontal line) marks the level at which policy is considered tight if it’s above, or loose if it’s below.

Right now, the index is near where it was during the economic boom in the ‘90s.

To put this in context, loose financial conditions are a positive for the economy, as they boost lending and encourage spending, whereas tight financial conditions limit lending and curb spending.

At the moment, financial conditions remain relatively loose, and therefore continue to act as fuel for the economy and the bull market.

Until this changes, stocks are your best investment.


Chad Shoop, CMT
Editor, Automatic Profits Alert