Stock Market Rally in Sight If Fed Hikes Then Pauses, JPMorgan Says
- ‘This outcome is not fully priced into equities,’ Tyler says
- One-Day VIX shows trader anxiety over Fed day has eased lately
While bond traders have long been betting on a dovish turn from the Federal Reserve, stock traders have yet to fully embrace this and would fuel an equity rally on such an outcome, according to JPMorgan Chase & Co.’s trading desk.
In laying out its game plans for Wednesday’s policy decision, the firm’s team, including Andrew Tyler, said the “hike and pause” scenario is the most likely — and the S&P 500 could add 0.5% to 1% in its aftermath. The JPMorgan scenarios were issued Monday, right before renewed selling in US regional banks sent equity indexes sharply lower and sparked a rally in Treasuries. Swaps markets continued to show traders betting the Fed will raise rates by a quarter point, though expectations for rate cuts later this year intensified.