The Federal Reserve’s first interest-rate increase since 2023 has revived concerns about a near-term setback for U.S. stocks, even as the S&P 500 remains up more than 12% this year and close to record levels. The central bank raised its benchmark rate by 25 basis points to combat persistently high inflation and signaled another increase by year-end, while investors are pricing in additional hikes in 2027. Historical data from LPL Financial show the S&P 500 has declined a median 2.6% three months after the first increase in a hiking cycle. RBC Capital Markets found that five of six comparable cycles produced declines of 8% to 14% from peak levels, with lows arriving one to three and a half months after the initial hike. Analysts say the current cycle appears shorter and less aggressive than the 2022-2023 episode, when the index fell 25% from its peak amid recession fears and 525 basis points of rate increases. Fed funds futures indicated the policy rate could peak near 4.8% in a little over a year, implying slightly more than 100 basis points of total tightening. Stocks have historically recovered after initial weakness: the S&P 500 was up a median 6.8% one year after the first hike, except in the 2022-2023 cycle. Investors will focus on growth and inflation data, including the ISM manufacturing index’s new orders component, to assess the market impact.