92% Chance of a Fed Rate Hike: Risk of a Stock Pullback

The market expects a Fed rate hike. We examine how the S&P 500 performed at the start of previous tightening cycles and what that history means for assessing risk today.

TL;DR

A rate hike has become the market’s base case. History points to a risk of short-term stock declines, but subsequent performance depends on how long tightening lasts and the state of the economy.

CME FedWatch: September 2026 Rate Expectations

This morning’s CME FedWatch chart puts the probability of a 25-basis-point rate hike at 92.7%. Such a move would raise the target range to 3.75-4.00%. The Fed’s two-day meeting concludes today, September 16: the decision will be announced at 2:00 p.m. ET, followed by a press conference half an hour later. Fed calendar.

Futures prices already reflect a rate hike as the base case, so attention will also turn to the Fed’s plans beyond this meeting. Signals of further hikes could increase pressure on stocks and Bitcoin.

BTC and S&P 500 52-Week Return (%)

As of September 12, the S&P 500’s return over the past 52 weeks is +15.98%, compared with -33.40% for Bitcoin. Stocks head into the Fed decision with a positive return over that period, while Bitcoin remains well below its level a year ago.

There have been seven first Fed rate hikes since 1988. Six weeks later, the S&P 500 was down in five of those episodes. The average return across all seven episodes was -2.83%, compared with the current return of +15.98%. In other words, stocks generally declined in the weeks following the first rate hike.

FAQ

How quickly did stocks recover after the first rate hike? In two of the seven cases, the S&P 500 was above its level on the day of the hike by the six-week mark. In the other five, the index was still down at that point.

What could be a negative surprise for the market today? A signal from the Fed that rate hikes will come more frequently or that rates will stay high for longer than market participants expect. This could increase pressure on stocks and Bitcoin, even if today’s hike matches expectations.

Conclusions

The market is almost certain the Fed will raise rates. The main question today is what signals it will send about its next steps. If the Fed signals tighter policy than market participants expect, pressure on stocks and Bitcoin could increase.

Live Charts

Explore the metrics behind this brief with live, auto-updating charts:

Fear & Greed Index - Composite market sentiment for risk appetite and sentiment extremes.
Funding Rates - Perpetual futures funding to track long-side or short-side leverage pressure.
Open Interest (BTC) - Total futures positioning and 7-day BTC-denominated change.
Exchange Netflow - Net BTC moving to and from exchanges across positive and negative flow regimes.
MVRV Ratio - Market value vs realized value to identify valuation regimes and cycle risk.