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Shorting Into the Rate Hikes, $SPY and $QQQ: Historical Study

min read

The study shows how $SPY and $QQQ performed historically in the short term after the rate hikes.

We live in the world of anticipated rate hikes. The stock market does not seem to like that at all. Although there are many other factors such as war, unprecedented inflation, and maybe even echos of pandemic, we wanted to see how $SPY and $QQQ performed historically in the short term after the rate hikes.

To do so we have backtested Rate Hikes back from 2015 to 2018. Overall there were 9 hikes (the data is taken from the Bankrate website).

  • 1 x 0.25 in 2015
  • 1 x 0.25 in 2016
  • 3 x 0.25 in 2017
  • 4 x 0.25 in 2018

In this study, we have backtested 2 strategies. Each strategy trades/invests $10K for every rate hike.

  • Strategy 1: SHORT on the announcement date and hold 1 week
  • Strategy 2: SHORT on the announcement date, exit EOD, repeat for 1 week
Strategy Setup

The Results

Shorting every day and closing the position EOD came out a bit better overall. It also protects you from sudden spikes overnight.

  • SPY: $1,658.7 total gain vs. $1,626.9 for 2015-2018
  • QQQ: $1,634.0 total gain vs. $1,353.3 for 2015-2018

Below is a breakdown by each year:

PS: Do your research and due diligence before trading or investing, especially shorting.

Breaking Equity is neither a broker, nor provides investment advice. Breaking Equity is a platform designed and built for user generated trade testing and algorithms. It is not intended to be trading or investing advice. Breaking Equity does not recommend stocks, equities, or any other vehicle to buy or sell. Breaking Equity is a platform to enable you to make your own investment decisions. All data, analysis, tests, metrics, transactions, signals, and platform are presented ‘AS-IS’ and without warranty. Breaking Equity does not guarantee performance and holds no liability for your trading, algorithms or executions via broker services. Please invest wisely. Please do your own research and due diligence before trading or investing.