Historical data demonstrates that Federal Reserve rate hike cycles consistently create headwinds for equity markets. The painful 2022 market correction serves as a stark reminder of how monetary tightening policies compress valuations and reduce investor appetite for risk assets. When the Fed raises interest rates to combat inflation, borrowing costs surge, corporate profit margins compress, and bond yields become more attractive alternatives to stocks. Understanding this cyclical pattern helps investors prepare portfolio strategies and anticipate potential market volatility during periods of monetary policy tightening.

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