Federal Reserve officials now anticipate at least one interest rate increase in 2026, marking a sharp shift from earlier expectations of further cuts. The Fed's latest dot plot shows half of policymakers expect at least a quarter-point hike this year, up from zero in March, with about one-third projecting at least two increases. Historically, the first rate hike in a tightening cycle has been followed by an average S&P 500 decline of 10% and a Nasdaq Composite drop of 15% within three months, based on the four such pivots since 1999. The shift comes as inflation has accelerated, prompting strategists at Goldman Sachs to note that delaying cuts is the most natural path until tariff and oil price effects fade. While Morgan Stanley economists believe the Fed may hold rates steady if inflation cools, the prospect of higher rates threatens stretched stock valuations, with the S&P 500 trading at 20.1 times forward earnings, above its 10-year average of 19.
Goldman Sachs Group Inc
Morgan Stanley
CME Group Inc
Netflix Inc
NVIDIA Corporation