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7 Facts About the World When Interest Rates Were Last Hiked

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On Wednesday, the Federal Reserve will announce its updated policy statement, and everyone and their mother thinks we will finally see an increase in the benchmark interest rate. After hovering near zero since the crisis in 2008, Janet Yellen and the Fed seem to finally think that the US economy has recovered enough for a rate hike.

While this is a good sign for the overall health of the economy, rate hikes can cause turmoil in the investment world. Although the adjustment will probably be just a quarter of a percent, investors need to prepare themselves before the hike by understanding what will move where (also read 3 Sectors to Benefit If Fed Hikes Rate Tomorrow ).

Part of the difficulty here is that it has been so long since the last rate hike in 2006. That's nearly a decade ago! The world is a much different place and the markets have changed quite a bit. Back then, we were celebrating the successful IPO of little-known Mexican chain Chipotle CMG . Today that stock has grown over 1,000% and is one of the biggest names on the market.

Facebook's FB Mark Zuckerberg was just 22-years-old and far from the social media superstar he is today. NBC's hit show "Heroes" had just debuted, and now it's back for a reboot. I think people still had pet rocks in 2006!

Ok, maybe my nostalgia is going back too far. But you get the point-the last Fed rate hike was a long time ago. Here are seven more fun facts about what the world, and the markets, looked like during the last rate hike on June 29, 2006:

1. Number One Movie

Adam Sandler's Click was the number one movie at the box office. Sandler is polarizing at best, but Click currently sits at a 6.4/10 on IMDB and actually has some feel-good moments. It's no "Happy Madison" but it's certainly better than "Jack and Jill."

2. Number One Song

"Hips Don't Lie" by Shakira was the number one song on the Billboard Hot 100 list. This song was a jam, is still a jam, and will continue to be a jam until music plays no more. It might not get radio play these days, but you better believe this still bumps at high-school proms across the country.

3. Sports

Late June is that beautiful time of the year where the weather is perfect and there is literally nothing better to do than watch some baseball. At this point in 2006, the Detroit Tigers had the best record in the MLB. The Tigers would go on to lose to the St. Louis Cardinals in the 2006 World Series.

4. Biggest Mover

June 29 was a particularly interesting day on the market as investors reacted to the news of the rate hike. The biggest mover of the day was McDonald's MCD . The burger chain gained over 5%, helped by an upgrade from Merrill Lynch.

5. Oil

On the same day, the price per barrel of oil jumped $1.33 to $73.52. At the time, that probably didn't seem like a ridiculous price. Compared to today's sub-$40 price, however, that is almost confusingly high.

6. The Dow Jones

Dow Jones Industrial Average Value Over Time - Trailing 10 Years | FindTheCompany

The Dow Jones Industrial Average DJIA gained 2% on June 29, 2006, closing at 11,190. Of course, the major indexes would lose a lot of value over the next couple of years, but the DJIA has recovered and has gained nearly 60% since this date.

7. S&P 500

S&P 500 Value Over Time - Trailing 10 Years | FindTheCompany

The broader S&P 500 also had a great day, gaining 2.2% and closing at 1272.87. Since then, the S&P has gained nearly 65%.

Bottom Line

Tomorrow is a big day for the US economy simply because a rate hike hasn't happened in quite a long time. As you can see, the world was a different place during the 2006 rate hike. Regardless, investors should keep an eye on the news, and the markets, tomorrow as the Fed should raise rates by a quarter of a percent.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

CHIPOTLE MEXICN (CMG): Free Stock Analysis Report

MCDONALDS CORP (MCD): Free Stock Analysis Report

FACEBOOK INC-A (FB): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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