3 scenarios for the Fed rate decision — and how markets could react to each

Core Viewpoint - The Federal Reserve is expected to announce a rate cut during its upcoming meeting, driven by recent tame inflation data and signs of weakness in the job market [1][2]. Group 1: Market Expectations - As of Monday, the market has priced in a 96.2% chance of a 25-basis-point rate cut at the September meeting [2]. - JPMorgan estimates a 95% likelihood of a Fed rate cut, with an 87.5% chance of it being a 25-basis-point reduction [2]. Group 2: Potential Market Reactions - A "Dovish Cut" is anticipated, which could lead to a positive market reaction, with the S&P 500 potentially gaining about 1% immediately after the cut, reaching approximately 6,650 [6]. - However, there are concerns that this could lead to a "sell-the-news" event, where stocks may decline as investors reassess the macro environment and other factors [7]. Group 3: Future Projections - If headwinds materialize, stocks could fall by as much as 5% in the following weeks, but this could create buying opportunities for investors [8].