Here’s when history says the post-Fed pause rally should start — and the two unlikely sectors to benefit

Stock futures are largely tilting south as investors ponder the 10th straight, and perhaps final, Federal Reserve interest-hike and bank stress simmers. The European Central Bank has also just hiked rates, as earnings from Apple and others, also make up a frenetic Thursday.

A few tomatoes are being lobbed at the Fed Chairman Jerome Powell for his?“sound and resilient,” ?description of the U.S. banking system, followed by a collapse in PacWest shares. (More below) Hedge fund boss Bill Ackman was?practically apoplectic , while bond-trader Jeffrey Gundlach said?bank stress won’t stop until rate cuts start .

Elsewhere, JonesTrading’s chief market strategist Mike O’Rourke said he’s “stunned” that Powell has now “hiked twice in the face of sizable bank failures. While we would agree these challenges are far less severe than 2008, we also believe discretion is still the better part of valor,” he told clients.

“Nonetheless, here we are on the cusp of a 4th bank failure and the S&P 500?SPX,?-0.70% ?is 2.5% higher than where it closed the last day SVB traded, before it was placed in receivership. Maybe the Fed Chairman is taking his signal from the equity market as both have expressed a low level of regard for risk,” said O’Rourke.

Read:?Why stock-market bulls can’t celebrate as Fed hints at pause in rate hikes

Onto our?call of the day, which offers more cheer in the face of fear, as trader Kevin Muir of the?Macro Tourist blog ?walks us through what markets did after final Fed hikes, with some surprising stock winners.

Muir looked at total returns from the day of the last Fed increase, representing average returns from tightening campaigns between 1984 and 2018. “On average, on the first day after the last hike, stock markets decline. The next day it gets worse. And on the third day, it declines a little more,” he said.

But on the fourth day, markets stop falling and two weeks later stocks are up, meaning investors just take a few days to digest the rate hike and start to move on.

Moving even further out, things also don’t look shabby at all, as his chart shows:

The big takeaway here, says Muir, is that investors should not rush out to buy right away, but hold their fire for a couple of weeks, if things go to script. He also looked at bonds and found things bullish across the boards with falling yields, but only on week 3 and 4 after the last hike.

As for stocks, he did this rundown of major sectors from the first week to 90 days later:

In the first week, he finds everything losing but financials, then he scans further out, where tech stocks are in the lead after 90 days.

“Looking at the next winners, we have financials and real estate. Holy smokes, talk about a scary duo to own right now – but maybe that’s why they might work? The sentiment in these two sectors is so downtrodden, we could see a massive short covering rally,” said Muir.

Read:?SVB and First Republic are just the first of many U.S. banks that will fail — if you believe 800 years of history

The markets

Stock futures?ES00,?-0.24% ?YM00,?-0.16% ?NQ00,?-0.09% ?are lower after Wednesday’s post-Fed decision decline and bank stress heats up, while Treasury yields?TMUBMUSD02Y,?3.850% ?continue to tumble, with the 10-year note?TMUBMUSD10Y,?3.380% ?at 3.34%. Crude-oil futures??CL.1,?0.42% ?are barely higher, clinging to $68 per barrel. The dollar??DXY,?0.18% ?is down and gold?GC00,?0.40% ?and silver?SI00,?0.46% ?are higher.

The European Central Bank has hiked its key rate by 25 basis points as expected, saying the inflation outlook?remains “too high for too long.” ?A news conference with President Christine Lagarde is coming up. European stocks?SXXP,?-0.53% ?are weaker across the board,

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