How stocks perform during tightening cycles

According to BofA, during times of QT, history suggests that stocks>bonds, Value>Growth, large = small.

The sectors which underperformed the index most consistently during historical tightening cycles were bond proxies (Utilities and Real Estate) along with Industrials (all with a 20% hit rate).

Value factors have historically performed best during Fed hiking cycles (shown earlier). And work on Late Cycle regimes suggests that Free Cash Flow to EV was the most alpha-generative factor in Late Cycle periods historically.


$Dow Jones Industrial Average(.DJI.US)$ $S&P 500 Index(.SPX.US)$ $Nasdaq Composite Index(.IXIC.US)$ $Invesco QQQ Trust(QQQ.US)$ $Bank of America(BAC.US)$ $Berkshire Hathaway-B(BRK.B.US)$ $Apple(AAPL.US)$ $Tesla(TSLA.US)$