Some on Wall Street believe investors are underestimating the possibility that the Fed might deliver a surprise 100 basis-point interest rate hike at the...
With both U.S. stocks and bonds under pressure on Tuesday, some on Wall Street argue that investors are underestimating the possibility that the Fed might deliver a surprise 100 basis-point interest rate hike at the close of its two-day policy meeting on Wednesday.
“We think a 100 bps hike would unnerve Wall Street, as it would imply that the FOMC is overreacting to the data rather than sticking to its game plan, and would increase the likelihood that the FOMC will eventually overtighten and lessen the possibility of achieving a soft landing,” Stovall wrote in a note to clients.
But assuming the Fed does opt for a surprise full-percentage point hike, some can envision a scenario where markets actually rally in the face of a more strident Fed. But the argument for why the Fed might decide to deviate from its policy of carefully choreographed moves has clearly resonated with investors, evidenced by the fact that so many Wall Street strategists have chosen to address the possibility in the research they provide to clients and the media.
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