TL;DR
Whether the market rises or falls on a rate decision depends on whether the move was already expected, not on whether hiking is good or bad.
On 16 September 2026 the Fed raised rates by 0.25%. It was the first hike in more than three years, and all twelve committee members voted for it.
The next day, US stocks rallied across the board. A friend asked the author: isn't a rate hike bad news? So why is the market up?
The bad news was already in the price
The key was the week before. By then the market broadly expected a hike, and share prices had already absorbed it — the jargon is 'priced in'.
Once the Fed actually announced it, the other shoe dropped and there was one less thing for the market to guess at. What markets hate is never bad news; it is not knowing what happens next.
2023 is the ready-made example
That year the Fed hiked four times, a full percentage point in total. If higher rates meant falling stocks, it should have been an ugly year.
Instead the Nasdaq gained 53.8% and the S&P 500 rose 26.3%.
So 'why didn't stocks fall when rates went up' is the wrong question. The right one is: did the market already know this was coming?
Why it matters
The real use of this rule is not forecasting prices but explaining why headlines and tickers so often disagree: by the time a story is on the front page, it has already been traded. What actually moves markets is the hike nobody saw coming.
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