If interest rates go up that means people will probably put their money into bonds or banks right? Does that mean it should be obvious to us that it won't be a strong market?
Based on recent history this definitely seems to be the case. They had an aggressive rate hike recently (2019) and it started to hurt the market. Then the market suffered during covid but the fed was miraculously able to save the market by taking alot of action. The question is can the stock market survive the feds tapering and the rise of interest rates?
The word tapering itself is very fitting. Tapering is a term that is also used to describe people who are trying to slowly come off drug addiction. There's good amount of evidence to suggest that the market is addicted to the feds support. You only have to look at the ridiculous rise in stock prices from just before COVID to now. For example Tesla went from 150$ in February 2020 to a ridiculous 1000 this week. It just doesn't make sense that something could rise that much during a crisis. Amd went from 45$ to 120$ during the same time frame. The sp500 went up about 25% and the dow 18%. The Vanguard Total Stock Market Index is an accumulation of every us stocks price into one index. It went from 78$- 112$ per share within the same time frame. That might not seem like much but it's about 35-40 percent rise.
Another thing to consider is that the fed might believe that some degree of this inflation is transitory. This could lead to a less aggressive rate hike which could be good for stocks. The problem with that assumption is that many analysts have been predicting 5-6 rate hikes which would be about 2-2.5 percent.
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