The Federal Reserve is widely expected to raise interest rates at its policy meeting on Wednesday, with fed funds futures pricing in a 93% chance of a quarter-point hike, up sharply from 33% one month ago. A succession of hot inflation data, combined with rising energy prices linked to an ongoing war, is pressuring the long end of the Treasury curve, with the 10-year yield reaching a fresh 2007 high. JPMorgan’s trading desk has outlined five scenarios for how the stock market may react, ranging from a 2% decline if the Fed signals rates need to be materially higher, to a 1% gain if it removes 2025 rate cut guidance. The S&P 500 could fall 1.25% to 1.75% if the Fed holds rates steady, or rise 0.25% to 0.75% in the consensus scenario of a 25 basis point hike with no guidance.
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