The hike has also been priced to some extent into the U.S. dollar index, as the currency investors are future-oriented. Typically, the currency movements are the very leading indicator. Indeed, the history of the past three tightening cycles teaches us that the greenback gains in the six to nine months preceding the first interest rate hike over the cycle.

It does not mean, however, that the Fed’s hike will not cause the further appreciation of the greenback (and decline in stock prices). Everything depends on the timing and magnitude of the possible monetary tightening. At the moment, markets are pricing in a slower path than the median Fed’s official projection.

The history of the past Fed’s tightening cycles shows that investors did not always fully price to the extent the Fed had planned on raising rates. The cycle from 1999 to 2000 was generally anticipated correctly, however in 1994 the scale and pace of the Fed’s tightening surprised markets and hurt almost all asset classes.

Soon, the long-term interest rates increased sharply and the assets were repriced accordingly. The last tightening cycle from 2004 to 2006 was a different story, because the longer term interest rates hardly moved due to strong demand for U.S. assets from foreign investors.