In the summer of 2023, central banks finally took a break from raising interest rates, although reassurance on this front came towards year-end as inflation declined. US inflation fell from 9.1% in the summer of 2022 to 3.2% in November 2023, some of which reflected the Fed’s intervention taking effect.
This heartened investors, partly because history shows that market conditions can improve significantly once interest rates stop rising. The graph below shows how US stocks have performed around the final rate hike by the Fed in previous rate-hiking periods. Performance is usually flat in the build-up to that last hike but, if the US economy avoids falling into a recession afterwards, stocks perform pretty well the following year.