After the end of the interest rate cycle, the U.S. economy will recession? How will the market behave? At a press conference after the Fed's interest rate meeting at the end of last month, Fed Chairman Powell said that the current interest rate has reached a restrictive level, but the full impact of the interest rate hike has not yet appeared, so it is expected that high interest rates will remain for a longer period of time and will not cut interest rates during the year. Powell also mentioned that if there is data support, the Fed may raise interest rates again. However, due to the recent moderate performance of US economic data, most of the market still expects that the probability of the Fed's &#34;last plus&#34; in September is not high. But regardless of the September rate hike or not, the market has basically determined that high interest rates will remain for some time. As the impact of interest rate hikes gradually becomes apparent, some economists expect the US economy to fall into recession. In a report this month, JPMorgan Chase Global Market Strategy MD Nikolaos Panigirtzoglou and others reviewed the past Fed rate hike cycle and pointed out that in the past 12 Fed rate hike cycles, 7 of the past 12 Fed rate hike cycles followed or accompanied the economic recession. In * * these 7 interest rate hike cycles, the recession started on average 5-6 months after the last rate hike. * *! JPMorgan Chase found that on the eve of the last rate hike and after, stocks and credit will be under pressure in the context of recession, while rising sharply in the context of non-recession; the opposite is true for the dollar: rising in the context of recession and falling in the context of non-recession. In contrast, there is no difference in the performance of bonds, whether in the context of recession or non-recession, the last interest rate hike can reduce the yield of US bonds and steepen the curve; at the same time, in the context of recession, the change of the yield curve looks more obvious. ## U.S. Stocks, Credit Spreads: Under Pressure Shocks In order to compare the impact of the recession caused by interest rate hikes on assets, JPMorgan Chase observed the changes of S &amp; P 500, BBB-AAA credit spreads, 10-year U.S. bond yields, 10Y2Y yield curves and U.S. dollar trade-weighted index one and a half years before and one year after the end of the tightening. The results are as follows:&gt; The main differences occur near and after the last Fed rate hike.&gt;&gt; Before the last rate hike, both stocks and credit were generally relatively flat, but they tend to be under pressure after the last rate hike. And in the context of non-recession, they will rise sharply. ** &gt; &gt; The chart below also shows that stocks and credit have performed more diversified over the past year and a half in the current cycle compared to the average pattern of previous Fed tightening cycles, **but despite this change, stocks and credit have actually changed little relative to their levels a year and a half ago after factoring in the recession.&gt;&gt; ! &gt; &gt; ! ## USD: Recession Rising Similarly, the dollar moved differently after the last rate hike, rising against a recessionary backdrop and falling against a non-recessionary backdrop:&gt; ! &gt; &gt; Similar to stocks and credit, the dollar has been more volatile over the past year and a half than in previous Fed tightening cycles, but after factoring in the recession, the dollar has actually changed little relative to a year ago. ## Bonds: little to do with recession In contrast, whether recession or not, the impact of austerity on bonds is not much different:&gt; In the context of recession and non-recession Fed tightening, the pattern of bonds looks quite similar, both before and after the last Fed rate hike.&gt;&gt; ! &gt; &gt; U.S. Treasury yields rose before the last Fed rate hike and the curve flattened, while yields fell after the last Fed rate hike and the curve steepened. Nonetheless, the flattening/steepening of the curve appears to be more pronounced in recession-related Fed tightening cycles than in non-recession tightening cycles.&gt;&gt; ! ## NEW LOANS: Weakness points to recession In terms of lending, JPMorgan notes that weakness in new lending is more likely to mean a recession in an interest rate hike cycle:&gt; While lending collapses and recessions tend to occur together or around recessions, lending collapses do not occur in an interest rate hike cycle that does not trigger a recession. &gt; &gt; The chart below shows the 3-month annualized change in the stock of all bank loans in the Federal Reserve System H.8 report, and also includes data on the stock of household and corporate debt before 1973. The red vertical line depicts the last rate hike in a tightening cycle without an ensuing recession.&gt;&gt; ! &gt; &gt; This picture shows that **after the last rate hike of the Fed's tightening cycle, loan growth was barely affected and a recession did not occur. Given the weakness in U.S. credit creation, this means that a recession following the Fed's current tightening cycle is more likely. **Overall, JPMorgan's historical analysis above shows that seven of the past 12 Fed tightening cycles have followed or accompanied recessions. In these seven Fed tightening cycles, recessions in the U.S. began within 5-6 months, on average, after the last Fed rate hike. For stocks, credit and the dollar, the main difference came after the last Fed rate hike, not before. In contrast, there is no difference in bonds: whether the Fed's tightening cycle follows or follows a recession, bond yields fall after the last Fed rate hike and the yield curve steepens.

Morgan Stanley pointed out that in the past 12 Fed rate hike cycles, 7 were followed by or accompanied by an economic recession. Among these 7 rate hike cycles, the recession typically began 5-6 months after the last rate hike.

After each "final addition" by the Federal Reserve, what will happen?