The Fed has to walk a fine line Wednesday. How the stock market may react, according to JPMorgan

The messaging Fed Chairman Kevin Warsh issues at the press conference could have a large effect on how equities respond.

The Fed has to walk a fine line Wednesday. How the stock market may react, according to JPMorgan

TL;DR

  • The Federal Reserve is expected to raise interest rates at its policy meeting, a shift from earlier expectations.
  • Rising inflation and energy prices are pressuring the bond market and hurting stocks.
  • JPMorgan has identified five possible scenarios for the stock market's reaction.
  • Scenarios include a 'no hike,' a 25 basis point hike with no guidance, a hike with revised rate cut timelines, a hike with implications for a higher neutral real interest rate (R-star), and a hike focused on aggressively curbing inflation.
  • The market's response will depend on the Fed's decision and the messaging from Chairman Kevin Warsh.