BLOCK & What Actually Happens to Stocks and Bitcoin When the Fed Hikes Rates (2026)
The short version: since 1990, the US stock market has been positive across the full duration of all five Fed tightening cycles, and only one of those cycles saw a bear market begin within a year of the first hike. Bitcoin's record is shorter and noisier, but its worst losses clustered around moments when rate expectations repriced suddenly, not around the hikes that markets already saw coming.
This matters this week because the odds of a September hike just moved from about 35% to roughly 60% in a matter of days. Here's what the historical record actually shows.
Do rate hikes crash the stock market?
Not reliably, and the record is more specific than the headline suggests.
Since 1990 there have been five separate Fed tightening cycles. Across every one of them, the stock market was positive for the full length of the cycle. That isn't the same as saying it was calm — short-term volatility right after an initial hike is common — but the direction over the cycle was up in all five cases.
The nuance sits in the timing of what came next:
- Only one cycle (June 1999) saw a bear market begin within a year of the first hike, roughly nine months in, with a recession following about a year after that.
- The other four cycles saw no bear market and no recession within at least three years of the first hike.
- On average, it took 3.5 years from the first hike to the next bear market, and 4.1 years to the next recession.
What about unusually large hikes?
There's a recurring fear that an outsized hike means the Fed is overcorrecting and will break something.
Of the 40 individual rate hikes since 1990, five were larger than the standard 25 basis points. In four of those five cases, the S&P 500 was higher a year later, with an average return above 20%.
That isn't a claim that large hikes are good news. It's a correction to the assumption that they're automatically catastrophic.
What happens to asset returns right after a hike?
The short window and the long window look different, and conflating them is where a lot of bad decisions come from.
In the three months following an initial rate hike, only about 25% of asset classes outperformed their historical average returns. Stretch the window out, and more than 50% of asset classes outperformed their historical averages over multiple longer periods.
The market repricing to a new rate environment is a real, observable effect. It's also mostly a short-term one, historically.
How has Bitcoin behaved through a hiking cycle?
Bitcoin has lived through exactly one full cycle: March 2022 to July 2023, when the Fed raised rates 11 times, from near zero to 5.25–5.50%. One cycle is a small sample, and it was tangled up with crypto-specific disasters. With that caveat, the period-by-period record:
| Period | Bitcoin move | What was happening |
|---|---|---|
| Mar–May 2022 | about -20% | Both hikes fully expected; the decline came from absorbing the signal that hikes would continue all year |
| May–Jun 2022 | about -52% | Consensus repriced from 50bps to 75bps within a week; Terra/LUNA collapsed in the same window |
| Jul–Sep 2022 | about -26% | Both hikes anticipated; sustained pressure, no individual shock |
| Oct–Dec 2022 | about -22% | Hikes were telegraphed; FTX collapsed days after the November meeting |
| Jan–Mar 2023 | about +20% | Rose despite two hikes, as markets priced the end of the cycle and SVB failed |
| May–Jul 2023 | about -2% | The final two hikes of the cycle barely registered |
What actually moved the price — the hikes, or the surprises?
The surprises, and specifically the speed at which expectations changed.
The worst stretch of the entire cycle came in June 2022. Going into that meeting, the market consensus was a 50 basis point hike, and the Fed chair had explicitly pushed back on anything larger. Then a hot May CPI print (8.6%, a fresh 40-year high) and a report about the Fed's internal thinking during its blackout period flipped market pricing to 75 basis points within about a week. By the time the decision landed it was technically priced in — but the damage had already been done during the repricing.
Compare that to the end of the cycle. The final two hikes, in May and July 2023, were fully anticipated, and Bitcoin moved roughly 2% across a three-month window containing both of them.
And after the last hike of the cycle in July 2023, Bitcoin ran from around $29,000 to above $73,000 by March 2024 — eight months later, before the Fed had cut rates even once.
Why does this matter right now?
Because a fast repricing is exactly what just happened.
Following Fed Chair Kevin Warsh's Jackson Hole speech on 28 August 2026, the CME FedWatch Tool's implied odds of a September rate hike moved from about 35% to roughly 60%. Warsh's line that drew the reaction: "We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do." He also noted inflation has run above the Fed's 2% target for 65 straight months.
Whether the Fed hikes on 16 September is unknown. What's observable is that expectations moved a long way in a short time — the same category of event that the 2022 record flags as the disruptive part, distinct from the size of any hike that eventually lands.
Frequently asked questions
Do stocks always fall when the Fed raises interest rates? No. Since 1990, the stock market was positive across the full duration of all five Fed tightening cycles. Short-term volatility after an initial hike is common, but only one of those five cycles saw a bear market begin within a year of the first hike.
How long after a first rate hike does a bear market typically start? Historically, an average of 3.5 years from the first hike to the next bear market, and 4.1 years to the next recession. The 1999 cycle was the exception, with a bear market beginning within about nine months.
What happened to Bitcoin during the 2022-2023 Fed hiking cycle? It fell sharply through most of it, with the worst stretch being roughly -52% between May and June 2022 — a period that combined a rapid repricing of rate expectations with the Terra/LUNA collapse. By the final two hikes in 2023, Bitcoin moved only about 2% across three months.
Why did Bitcoin rise during some rate hikes? Between January and March 2023, Bitcoin gained more than 20% despite two hikes, because markets had begun pricing in the end of the tightening cycle and the Silicon Valley Bank failure shifted attention to stress in the traditional banking system.
Is it the size of a rate hike that moves markets, or something else? The historical pattern points to surprise and pace mattering more than size. Well-telegraphed hikes were largely absorbed; rapid shifts in expectations, even when the eventual decision was priced in by the day of the meeting, coincided with the sharpest declines.
What are the odds of a Fed rate hike in September 2026? As of 1 September 2026, the CME FedWatch Tool implied roughly 60% odds of a hike at the 15-16 September meeting, up from about 35% before Fed Chair Kevin Warsh's 28 August Jackson Hole speech. These odds move continuously — check a current source before relying on any figure.
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Block & Bull covers markets, money, and the chain — daily crypto and finance decoded, without the hype. Follow @blocknbull.
This article is educational content, not investment advice. Past cycles do not guarantee future outcomes, and this cycle may behave differently. Crypto and equities are volatile and you can lose money. Talk to a licensed professional about your own portfolio, and verify current figures before relying on them.