“In a negative real-rate environment, the market increased in price more cautiously as investors worried that the economy might not be healthy enough to endure higher interest rates,” Stovall said. “Yet, it also advanced more consistently, as confidence grew that the economy was indeed not going to slip into recession.”
Over the past month, the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO) have gained about 3.2%. Year-to-date, the S&P 500 ETFs rose over 3.3%.
It is only when inflation starts getting out of control and Fed is forced to aggressively hike rates that the market momentum typically falters, Stovall warned.
SPDR S&P 500 ETF
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Max Chen contributed to this article.