Wall Street wary of sustained Fed rate hikes impacting market rally

Wall Street is increasingly concerned about the prospect of a sustained Federal Reserve rate-hiking cycle, rather than a single rate hike, which could impact the ongoing market rally. According to Bloomberg, market participants fear that continued rate hikes might dampen the current growth trajectory, with particular focus on the S&P 500 and broader risk assets. Current data from the CME FedWatch tool indicates a 50-60% probability of a quarter-point hike in the Fed’s September meeting. However, the possibility of a more extensive tightening cycle has raised alarms, suggesting that the rally’s momentum may be at risk if borrowing costs continue to rise. Market indicators show that the prospect of ongoing Fed rate hikes is influencing gold price forecasts, with participants expecting a stronger dollar, which typically pressures gold prices downward. Currently, the likelihood of gold reaching $15,000 by the end of December remains low, with active market pricing suggesting a 0.7% chance for the highest threshold. The pricing appears consistent with concerns that a tightening cycle could lead to a stronger dollar, thereby reducing gold’s appeal as a hedge. Key Takeaways Wall Stree...