--- title: "If the Rate Hike Cycle Begins, Which Stocks Are Most Resilient? Barclays: Historically, Only Energy Stocks Rose Against the Trend" type: "News" locale: "en" url: "https://longbridge.com/en/news/296746998.md" description: "Market expectations for a Federal Reserve rate hike in early 2027 are rising. Barclays research shows that after the start of a rate hike cycle, the median decline of the S&P 500 will be 3.9%, with small cap stocks and financial stocks leading the declines, while investment style shifts toward Large Cap and Value Investing Style. Supported by commodities and real economy demand, energy stocks have historically been the only sector to record positive returns within one quarter after the first rate hike" datetime: "2026-08-24T06:56:19.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/296746998.md) - [en](https://longbridge.com/en/news/296746998.md) - [zh-HK](https://longbridge.com/zh-HK/news/296746998.md) generator: "portal-rs" --- # If the Rate Hike Cycle Begins, Which Stocks Are Most Resilient? Barclays: Historically, Only Energy Stocks Rose Against the Trend Market expectations for a Federal Reserve rate hike in early 2027 continue to rise. The latest research from Barclays shows that once the rate hike cycle begins, the overall stock market will face pressure, but energy stocks are historically the only sector capable of recording positive returns within one quarter after the first rate hike. According to Zhuifeng Trading Desk, a report released on August 24 by Barclays strategists Venu Krishna, Riddhiman Dass, and others indicated that **data from the past five rate hike cycles show that within one quarter after the first rate hike, the median decline of the S&P 500 reached 3.9%, small cap stocks fell even deeper by 7.2%, and financial stocks performed the worst, with a median decline of up to 8.4%.** Meanwhile, at the style factor level, value stocks outperformed growth stocks, and large-cap stocks significantly led small-cap stocks. Recently, long-term US interest rates have continued to climb, with the yield on 30-year Treasury auctions touching the highest level since 2001. Market pricing has begun to imply the possibility of a rate hike at the Federal Reserve's January 2027 FOMC meeting. Although Barclays economists expect the Fed will not raise rates in the first half of 2027, this structural shift in market expectations has prompted the strategy team to re-examine historical patterns of stock market performance during the initial phase of rate hikes for investor reference. ## Long-end Under Pressure, Rate Hike Expectations Advance Recently, significant anomalies have emerged in the US interest rate market. Despite economic data such as non-farm payrolls, inflation, and retail sales consistently falling below expectations, long-term interest rates have risen rapidly, with the yield on 30-year Treasury auctions reaching a new high since 2001. The US Treasury Department has begun to intervene in the bond market to manage rising rates, but this move itself has raised concerns about potential side effects among market participants. According to Barclays interest rate strategists, the main drivers of this rise in long-term rates are the large-scale issuance of long-duration bonds by AI-related companies and investors' increasing sensitivity to price. At the same time, short-term rates are also showing signs of pressure. In terms of market pricing, the implied policy rate path has shifted significantly toward a hawkish direction, with the market gradually incorporating the expectation of a rate hike at the first FOMC meeting in January 2027, even though overall inflation expectations have recently declined somewhat. Barclays economists' baseline judgment remains that the transmission path of CPI, PPI, and import price data to core PCE is mild enough, and the Federal Reserve will remain on hold in the first half of 2027, but they acknowledge that the shift in market expectations deserves close attention. ## Historical Patterns: Clear Turning Points in Sector Performance Around Rate Hikes Barclays' study covers five rate hike cycles: February 1994 to February 1995, June 1999 to May 2000, June 2004 to June 2006, December 2015 to December 2018, and March 2022 to July 2023. The macroeconomic backgrounds of these five cycles varied, ranging from tightening driven by strong real economy growth to rate hikes primarily aimed at suppressing inflation. The study found that the start of a rate hike cycle constitutes a clear turning point in the structure of stock market leadership. In the quarter before the first rate hike, the market overall remained in an upward channel, with the S&P 500 median rising by 2.2%. The energy and industrial sectors led the gains, with median increases exceeding 7.5%, while the communication services sector fell by about 2%. **However, once the rate hike was implemented, the market sentiment reversed quickly.** In the quarter after the first rate hike, the S&P 500 median fell by 3.9%, and the median decline of the Russell 2000 small cap index expanded to 7.2%. At the sector level, financial stocks suffered the deepest median decline at 8.4%; traditional defensive sectors such as healthcare, utilities, and consumer staples also ranked among the top decliners. Although the industrial, materials, and consumer discretionary sectors also experienced significant corrections, their declines were less than those of the defensive sectors; technology and communication services saw relatively milder declines, outperforming the broader market. ## Energy Stocks: The Only Sector to Post Positive Returns Against the Trend **Among all sectors, energy stocks were the only ones to achieve positive returns in the quarter following the first rate hike, with a median gain of 0.3%, and they consistently outperformed the S&P 500 across all five cycles.** This performance is highly consistent with the pattern of the entire rate hike cycle—during the five complete historical rate hike cycles, the median annualized performance of energy stocks also ranked among the top of all sectors. Barclays strategists pointed out that the start of a rate hike cycle usually occurs in the late stage of economic expansion, when economic growth still possesses resilience. In this context, the energy sector benefits from support in commodity prices and the pricing of robust demand from the real economy. In contrast, the negative reaction of financial stocks to the start of rate hikes has its internal logic: the banking industry relies on healthy credit demand, lower financing costs, and controllable credit risk, while the tightening of financial conditions brought about by rate hikes and the flattening of the yield curve both suppress banks' net interest margins. The plight of defensive sectors is also well-founded—in the late stage of expansion when economic activity remains strong, the Fed's tightening signals mean that the market's valuation premium for stable cash flows and robust earnings will face compression. ## Style Factors: Value Outperforms Growth, Large Cap Leads Small Cap At the style factor level, the start of the rate hike cycle also brings obvious rotation effects. The Fama-French small-cap relative to large-cap factor continued to weaken in the first two months after the first rate hike, followed by a prolonged recovery phase. The momentum factor performed strongly in the weeks before the rate hike, but its trend became volatile after the rate hike was implemented. The switch from growth to value was evident within two quarters after the first rate hike. In large-cap stocks, it manifested as a gradual trend of growth underperforming value; whereas in small-cap stocks, the disadvantage of growth relative to value appeared rapidly within two months after the rate hike, with a more violent reversal magnitude. Barclays strategists cautioned that all the above conclusions are based on historical samples from five rate hike cycles, with a relatively limited sample size, and past performance does not represent future returns. However, in terms of consistency, the patterns of energy stocks consistently outperforming, financial stocks and defensive sectors remaining under pressure, and growth underperforming value showed strong repeatability across the five cycles, offering certain reference value. ### Related Stocks - [.SPX.US](https://longbridge.com/en/quote/.SPX.US.md) - [BNO.US](https://longbridge.com/en/quote/BNO.US.md) - [IVV.US](https://longbridge.com/en/quote/IVV.US.md) - [VDE.US](https://longbridge.com/en/quote/VDE.US.md) - [IXC.US](https://longbridge.com/en/quote/IXC.US.md) - [SPY.US](https://longbridge.com/en/quote/SPY.US.md) - [VOO.US](https://longbridge.com/en/quote/VOO.US.md) - [SPLG.US](https://longbridge.com/en/quote/SPLG.US.md) - [SPXL.US](https://longbridge.com/en/quote/SPXL.US.md) - [UPRO.US](https://longbridge.com/en/quote/UPRO.US.md) - [SSO.US](https://longbridge.com/en/quote/SSO.US.md) - [SH.US](https://longbridge.com/en/quote/SH.US.md) - [SPXS.US](https://longbridge.com/en/quote/SPXS.US.md) - [SPXU.US](https://longbridge.com/en/quote/SPXU.US.md) - [SDS.US](https://longbridge.com/en/quote/SDS.US.md) - [SPYI.US](https://longbridge.com/en/quote/SPYI.US.md) - [JEPI.US](https://longbridge.com/en/quote/JEPI.US.md) - [XYLD.US](https://longbridge.com/en/quote/XYLD.US.md) - [SPDN.US](https://longbridge.com/en/quote/SPDN.US.md) - [SPUU.US](https://longbridge.com/en/quote/SPUU.US.md) - [SPYU.US](https://longbridge.com/en/quote/SPYU.US.md) - [SPYQ.US](https://longbridge.com/en/quote/SPYQ.US.md) - [SPYB.US](https://longbridge.com/en/quote/SPYB.US.md) - [SPYM.US](https://longbridge.com/en/quote/SPYM.US.md) ## Related News & Research - [UBS Global Wealth Management lifts S&P 500 year-end target to 8,100](https://longbridge.com/en/news/296597853.md) - [Kalshi files for S&P 500 perpetual futures in challenge to traditional exchanges](https://longbridge.com/en/news/296226910.md) - [GRAPHIC-Traders are bracing for an increasingly hawkish ECB](https://longbridge.com/en/news/296744183.md) - [Commodity vessel transits through Strait of Hormuz fall to three-month low，data shows](https://longbridge.com/en/news/296852213.md) - [MGK, JEPI, and SPYM: Why ETF AI Analyst Has an 'Outperform' Rating and Sees 10%+ Upside](https://longbridge.com/en/news/296395161.md) --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**