Wall Street Says a Single Fed Rate Hike Is Unlikely to End the Bull Run in U.S. Stocks

News Editor

2026-09-14 11:53:35

Wall Street strategists are not turning broadly bearish on U.S. equities even as expectations build for a Federal Reserve rate hike this week. Markets are now pricing in an 87% chance of a 25-basis-point increase, which would mark the first hike in three years if delivered. Goldman Sachs, Morgan Stanley and JPMorgan all argue that one move by itself may not change the medium-term direction of the stock market, with corporate earnings and economic growth still seen as the main supports. Historical data cited in the report points in the same direction. Since 1945, the S&P 500 has gone through 12 bear markets with declines of more than 20% and four additional deep pullbacks of 18% to 20%. Six of those episodes came after hiking cycles that directly led to recession. Goldman says markets have already absorbed expectations for more than three rate hikes over the next year, while Morgan Stanley is focused on whether higher Treasury yields are being driven by inflation or stronger growth. JPMorgan, for its part, sees oil as the key near-term variable. With the S&P 500 less than 2% below its record high, the 10-year Treasury yield near 5%, and Nasdaq 100 futures down about 1.6% on Monday, near-term volatility may still rise.

Wall Street strategists are not turning bearish on U.S. stocks as expectations grow for a Federal Reserve rate hike, according to BlockBeats on Sept. 14. The market is now assigning an 87% probability to a 25-basis-point increase this week. If that happens, it would be the first rate hike in three years.

Goldman Sachs, Morgan Stanley and JPMorgan each say a single hike on its own may not change the medium-term path of U.S. equities. In their view, corporate earnings and economic growth remain the main supports for the market.

Past bear markets were more closely tied to prolonged tightening and recession

Historical experience suggests that prolonged tightening, and the recession that can follow it, has been a much more important trigger for U.S. bear markets. Since 1945, the S&P 500 has recorded 12 bear markets with declines of more than 20%, along with four deep corrections in the 18% to 20% range.

Of those episodes, six came after rate-hiking cycles that directly led to recession. Another two were unrelated to both rate hikes and recession.

Goldman Sachs says markets have already priced in more than three hikes over the next year

Goldman Sachs said markets have already absorbed expectations for more than three rate hikes over the coming year. The bank added that corporate earnings and balance sheets remain relatively solid, which means the policy shift itself may have only a limited effect on stocks.

Morgan Stanley focuses on what is driving Treasury yields higher

Morgan Stanley warned that U.S. stocks could see a technical correction of about 10% if an inflation shock pushes the 10-year Treasury yield even higher.

At the same time, the bank said equities may still be able to withstand higher yields if the move mainly reflects strong economic growth rather than uncontrolled inflation.

JPMorgan sees oil prices as the key near-term variable

JPMorgan identified oil prices as a key variable in the near term. Oil holding above $100 could lift inflation expectations and compress equity valuations. If pressure from oil eases, the market may find it easier to digest the impact of higher rates.

Short-term volatility may still intensify

The S&P 500 is currently less than 2% below its record high, while the 10-year Treasury yield is approaching 5%. Nasdaq 100 futures fell about 1.6% on Monday, a sign that near-term market volatility could still increase.

This article was originally published by Bit.Fan. For more cryptocurrency news and market insights, visit www.bit.fan.

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