Learning from history, which assets have performed best since the start of the global interest rate hike cycle?

With the renewed conflict between the US and Iran and interest rate hikes by central banks in the US, Europe, and Japan, global monetary policy is poised for a new tightening cycle. Looking back at history, examining the ten synchronized global tightening cycles since the 1970s may provide important insights for current asset allocation.

On September 23, the Eastmoney Securities Research Institute released a special macroeconomic report, which systematically analyzed the characteristics and patterns of ten synchronized tightening cycles globally since the 1970s, based on a database of policy interest rates from 104 economies. The report points out that although the current global net interest rate hike diffusion index has rebounded somewhat due to the escalation of the US-Iran conflict at the end of August, its overall level remains significantly lower than in previous typical tightening cycles, and it has not yet entered a phase of fully accelerated tightening.

Against this backdrop, the report believes there is room for increased allocation to US Treasuries. Analysts believe that the previous surge in US Treasury yields was due to pricing discrepancies, with the market already pricing in expectations of interest rate hikes. If the US-Iran situation eases, inflation expectations are expected to converge downwards as oil prices fall, and the term spread is also expected to narrow further.

Ten rounds of tightening cycles, three types of driving logic

Based on changes in the net interest rate hike diffusion index, the Eastmoney Securities Research Institute has divided the global synchronized tightening since the 1970s into ten major cycles and summarized them into three major types.

The "anti-inflation" type includes the US-Iran conflict in 2026, the impact of the COVID-19 pandemic in 2021, and the Volcker rate hike in 1978. All of these were triggered by external events such as war or pandemics, which caused supply shocks and drove up global inflation. The economies followed suit with a high degree of synchronization.

The "overheating suppression" type includes the 2010 European debt crisis, the 2008 financial crisis, the 2000 dot-com bubble, the 1997 Asian financial crisis, and the interest rate hike game between the US, Japan, and Germany following the Plaza Accord and the Louvre Accord in the 1980s. This type of cycle is driven by asset bubbles or debt crises and often lasts longer.

The "preventative" approach is exemplified by the US exiting quantitative easing in 2018 and the Federal Reserve raising interest rates in 1994. Its characteristics include proactively withdrawing easing measures after the economy stabilizes, with relatively limited global synchronization and interest rate increases.

It is worth noting that the current round is of the "anti-inflation" type, with the core contradiction being the inflationary pressure caused by the US-Iran conflict, rather than economic overheating or asset bubbles.

The United States remains the "anchor" for global policy interest rates.

The report draws the following core conclusions through a systematic review of the pace of interest rate hikes in eight representative economies and a cross-correlation analysis of the guiding capabilities of the three major central banks in the US, Europe, and Japan.

Of the ten tightening cycles, the US participated in all but two (1997-1998 and 2010-2011), with five (approximately 63%) showing a significant pulling effect. Cross-correlation analysis shows that, across the entire sample, changes in US policy interest rates lead other economies by about two months; since 2000, this leading advantage has remained strong, with a lead period of approximately one month and a peak correlation coefficient of 0.64.

The event study further confirms that after the US shifted to raising interest rates, the net rate hike diffusion index in other economies peaked within approximately three months, indicating that the US policy cycle has a strong triggering effect on the global economy. The report also points out that before the US officially cuts interest rates, the net rate hike diffusion index in other economies often turns negative first, meaning that the market diffusion of rate cut expectations may be higher than that of rate hikes, and "the market is more inclined to trade easing in advance."

The Eurozone's cycles are highly synchronized with the global cycle, with a zero lead time for cross-correlation and a correlation coefficient as high as 0.85, indicating that it resonates more with the global cycle than unilaterally leads it. Japan, on the other hand, exhibits a significant lag, with the full sample cross-correlation showing a lag of approximately seven months and a weak correlation. This is related to Japan's long-term negative interest rate policy, and the spillover effects of its policy changes on other economies are relatively limited.

Currently, we have not yet entered a full-blown tightening phase, and US Treasuries offer investment value.

Despite the fact that the three major central banks in Europe, the US, and Japan raised interest rates one after another during the "super central bank week" in September, the report believes that this round has not entered a phase of synchronized and accelerated tightening globally.

Looking at the net interest rate hike diffusion index, there was a noticeable upward surge in June 2026, but it quickly fell back, indicating that the tightening momentum did not continue to accumulate; the current overall level of the index is significantly lower than the high point of a typical tightening cycle. The report points out that the transmission chain between oil prices and inflation is the key variable at present. If the situation between the US and Iran eases, inflationary pressures are expected to weaken as oil prices fall.

In this context, the report offers a positive outlook for US Treasuries. Analysts believe that the previous rise in yields was partly due to pricing discrepancies, with the market already pricing in expectations of interest rate hikes. If Fed Chairman Warsh's definitive statements can reduce the high term premium resulting from previous "strategic ambiguity," the cost-effectiveness of long-term US Treasuries will become more apparent, and the term spread is expected to narrow.

Three major variables will determine the subsequent trend

The report suggests that the following three variables will have a key impact on the path of global interest rates and asset pricing.

The report highlights the policy uncertainty surrounding the US-Iran conflict and the US midterm elections. It points out that the conflict is likely the core issue at present. While the signing of the Memorandum of Understanding (MOU) initially eased overall pressure for interest rate hikes, the renewed escalation of the situation has forced major central banks to make a more difficult trade-off between slowing growth and rebounding inflation. Meanwhile, the uncertainty surrounding the US midterm elections could impact fiscal policy, the debt ceiling negotiations, and the global interest rate path.

The evolution of interest rate differentials after Japan exits zero interest rates. Unlike previous tightening cycles, Japan has now exited its zero-interest-rate policy and the probability of interest rate hikes continues to rise. Changes in the US-Japan interest rate differential pose a potential impact on global carry trades and capital flows. The report warns that a large-scale unwinding of carry trades could trigger a rapid appreciation of the yen, tightening of global liquidity, and increased volatility in risky assets.

The potential impact of the AI industry on interest rate trends. AI-related financing needs and capital market fluctuations may influence the central bank's judgment on financial conditions and interest rate paths, becoming a new variable in this cycle that differs from the past.

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