The Market Just Started Betting on a Hike
For more than a year the only question about the Fed was when it would cut. That question just flipped. The CME FedWatch tool, which reads rate bets straight from futures prices, now shows the market leaning the other way, toward a Fed rate hike before the year is out.
The numbers are hard to ignore. FedWatch puts the odds of higher rates at the September 16 meeting near 75%, and by the October 28 meeting at roughly 95%. A month ago a hike was barely on the table. Now it is close to the base case. The trigger is PCE, the inflation gauge the Federal Reserve actually targets, which came in at 4.1% in the latest print.
This is why the money keeps moving the same direction. As AI names cool, cash is rotating into healthcare and other non-AI defensives, with AbbVie drawing extraordinary buying volume. Even with WTI oil back near $70, its pre-war level, the inflation pressure has not eased enough to change the Fed’s path.
One warning sits underneath. Analysts have set the highest earnings bar since 2021, expecting S&P 500 profits to grow 22% from a year ago. When expectations are that high and rates are turning up, the room for disappointment is wide.
The focus of the market today: a hike is no longer the risk case, it is the bet, and earnings season has to clear a very high bar.
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About the Author
Daniel Yue has been an active investor since 1980, with experience spanning stocks, currencies, futures, metals, and bonds. A scholar of the Chicago School of Economics, he holds a Certificate with Distinction from Cambridge University and a degree in International Trading from National Taiwan University. He served as Chief Analyst for over 30 years and Chief Mentor at Sincere Finance. In 2017, he received an award from the University of Arizona for financial internship leadership.
The analysis and opinions expressed in this article are for educational purposes only and do not constitute financial advice. Investing involves risk. Please consult a qualified financial advisor before making investment decisions.
About the Author
Daniel Yue has been an active investor since 1980, with experience spanning stocks, currencies, futures, metals, and bonds. A scholar of the Chicago School of Economics, he holds a Certificate with Distinction from Cambridge University and a degree in International Trading from National Taiwan University. He served as Chief Analyst for over 30 years and Chief Mentor at Sincere Finance. In 2017, he received an award from the University of Arizona for financial internship leadership.
The analysis and opinions expressed in this article are for educational purposes only and do not constitute financial advice. Investing involves risk. Please consult a qualified financial advisor before making investment decisions.