After three years, the Fed has reversed course. Which parts of your portfolio will suffer?
Rates in the US are rising after three years, and technology stocks still didn't fall on Wednesday. The battle for your money isn't happening at the Fed, but in the bond market, where the yield jumped above 5%. Who wins and who loses?
Key points
After three years, the Fed raised rates and technology stocks reacted completely differently than the textbook promises.
The yield on the ten-year bond jumped to 5.041%, the highest since 2007, and that even before the Fed's decision.
New Fed Chair Kevin Warsh refused to call financial conditions restrictive and also rejected the committee's own forecasts.
Ed Yardeni on Wednesday lowered his S&P 500 target from 8,400 to 7,900 points, with a counterintuitive rationale.
Major central banks are tightening simultaneously for the first time since 2022, so there is no region with cheap money left.
The market spent two years learning one game. On Wednesday, it ended.
From September 2024 to December 2025, the US central bank cut rates by a total of 1.75 percentage points, from a range of 5.25-5.5% to 3.5-3.75%. The last cut came on December 10, 2025, and investors adopted a simple logic over that time: money is getting cheaper, future earnings are worth more, buy growth.
Nine months later, the Fed committee voted unanimously to raise to a range of 3.75-4%. It's the first increase since July 2023 and came a few weeks before the November US elections. But for your portfolio, something else is more important: the entire logic trained over two years is reversing.
The market's reaction at first glance looked textbook. At the close, as summarized by CNBC, the Dow Jones lost 631 points (-1.21%) to 51,461.90, the S&P 500 fell 0.45% to 7,551.81, and the Nasdaq finished 0.01% lower, practically unchanged. All three indexes were in positive territory before the decision.
But the key detail is in the calendar: the S&P 500 closed lower for the seventh time in the last eight sessions. Most of the damage happened before the Fed even met.