Trump predicted last year that a rate hike would cause a stock market crash, but history suggests the opposite. Despite what Donald Trump predicted last year, stock market investors can celebrate when the Federal Reserve raises interest rates, probably for quite some time.

In theory, rising interest rates are supposed to hurt the stock market because it makes interest-rate instruments relatively more attractive and reduces liquidity in the marketplace. But in reality, interest rates and the stock market usually trend in the same direction over the long term.

That is because the conditions that lead to higher rates, such as an acceleration in economic growth, also fuel bull markets for stocks, while the drivers of rate cuts, like an impending economic recession, are often behind bear markets. The Fed raised its target for the federal-funds rate by 25 basis points 0. Starting on June 30, the Fed raised its fed funds target at each of consecutive meetings through June 29, , with the rate rising to 5.

Since the Fed starting cutting rates on Sept. Eventually, rates will get high enough to choke off economic expansion and hurt stocks, but based on current market dynamics, the market appears to be safe for quite a while, maybe even years. Tomi Kilgore is MarketWatch's deputy investing and corporate news editor and is based in New York.

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