Fed Hike: The Real Test Is What Comes Next
Markets are heading into the Fed decision with a 25 bps hike largely expected. Futures were pricing roughly a 92% probability of a move to 3.75%–4.00% as of Sept. 16. 
That makes the hike itself almost secondary.
The real market test is the message that comes after it. 👀
If the Fed signals that inflation, oil and rising Treasury yields could require further tightening, the current “priced in” argument gets challenged quickly. The 10-year Treasury briefly moved above 5%, while oil remained above $100 — a combination that keeps pressure on financial conditions. 
🟢 What could support stocks
• Strong corporate earnings
• Economic growth holding up
• A hike that comes with relatively stable forward guidance
• Investors already positioned for the move
🔴 What could pressure the market
• More hikes signaled for later this year
• Inflation expectations moving higher
• Treasury yields staying above 5%
• Higher discount rates hitting high-valuation growth stocks
Goldman Sachs has argued that a hike does not necessarily prevent equities from rising, particularly if earnings remain supportive. 
My focus tonight isn’t the 25 bps. It’s the next sentence from the Fed.
If the rate hike is already priced in, is the real risk an unexpectedly hawkish outlook? 📈📉
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