Why investors' best move in reaction to Fed's rate hike is doing nothing at all

Your best portfolio move in response to the Federal Reserve’s rate-hike decision may be to do nothing different. That’s because the equity risk premium — the amount by which stocks outperform T-bills — is on average no lower when interest rates are higher. This is illustrated by the accompanying chart, courtesy of calculations provided by Wes Crill, a vice president at Dimensional Fund Advisers. As you can see, the S&P 500 SPX on average has produced nearly identical returns historically regardless of whether short-term Treasury rates are above or below the median. Crill said in an email that the difference between the two columns in the chart is not statistically significant.