Citigroup: Japanese and UK stocks outperform U.S. after Fed rate hikes

Citigroup analysts report that U.S. equities historically face relative losses following the initial interest rate hike of a Federal Reserve monetary tightening cycle. According to a report led by Beata Manthey, U.S. stocks tend to underperform by an average of nearly 2% immediately after the first rate increase, before recovering over the subsequent 6 to 12 months.

During this initial period, international markets often outperform their American counterparts. Specifically, Japanese and British equities tend to beat U.S. stocks more than 50% of the time at the start of a cycle. Japanese markets see average relative gains of approximately 3%, while the United Kingdom and Australia see gains around 2%.

While futures markets currently indicate a 60% probability of a Fed rate hike in September, Citigroup analysts do not project immediate increases.