JUN · ISSUE 26 · June 23, 2026
MACRO · ALERTWhat if the Fed hikes instead of cutting?
The market is betting on cuts. One big bank sees up to three hikes this year. Someone is going to be wrong.
BoFA SEES
3 hikes
possible this year
MARKET SEES
cuts
the opposite
30-YEAR
~5.0%
bonds already falling
THE NUMBER
3
↑ rate hikes a big bank won't rule out this year
BoFA Research broke from consensus: it sees up to three Fed hikes in 2026, just as the market treats cuts as a done deal. Bonds have already started to agree.
DATA
ZOOM IN3 hikes
3
▲ possible hikes this year · the market expected the opposite
If the Fed hikes instead of cutting, your mortgage, your stocks and your bonds all flip the script at once.
Going from expecting cuts to fearing hikes isn't a nuance: it changes the price of money, and with it the price of almost everything.
- RATES
- — The price of money. When they rise, borrowing gets pricier.
- BP
- — Basis points. 1 bp = 0.01%. A typical hike = 25 bp.
READ
WHY IT MATTERSIt's not the bond that moves: everything else reprices
“When the safe bond pays 5%, it isn't the bond that moves: it's the valuation of everything else that adjusts downward.”
When the risk-free yield rises, the bar for every risky asset rises with it.
- YIELD
- — What a bond pays per year relative to its price.
- VALUATION
- — The price the market pays for future earnings.
- DISCOUNT
- — The rate used to value future cash flows. Higher → worth less.
DIVERGENCE
TWO SCRIPTSTwo opposite bets on rates
Between minus two and plus three lies a chasm. Thursday's inflation print starts deciding who's right.
Expected rate moves by year-end: the market sees cuts; one big bank, hikes.
- CUT
- — A reduction in interest rates by the central bank.
- HIKE
- — A rate increase to cool the economy and inflation.
SCENARIOS
WHAT CHANGESWhat happens depending on which way the Fed leans
IF THE FED HIKES
The script almost nobody holds
- Long bonds keep falling: the 30-year settles above 5%.
- Expensive stocks (tech, growth) suffer: their valuation is discounted at higher rates.
- The dollar tends to strengthen, squeezing commodities and emerging markets.
IF THE FED CUTS
The script the market is pricing
- Bonds rebound: yields fall, prices rise.
- Risk appetite returns: growth and small caps breathe.
- The dollar eases, giving gold and commodities room to run.
We don't predict: we show how each asset reacts whether the central bank hikes or cuts.
- GROWTH
- — Companies valued on future earnings (tech, biotech).
- EMERGING MARKETS
- — Developing-country markets, sensitive to the dollar and US rates.
UNDER THE HOOD
WHAT THE FED WATCHESWhat weighs on the Fed's decision
Its number-one mandate · key print Thursday
The other half of the dual mandate
Keeping the economy from breaking as it cools
Financial conditions and stability
Inflation rules. That's why Thursday's PCE can tip the scale between hiking and cutting.
Illustrative breakdown of what the central bank watches most before moving rates.
- PCE
- — The Fed's preferred inflation gauge (personal consumption expenditures).
- DUAL MANDATE
- — The Fed's two goals: stable prices and maximum employment.
CALENDAR
THIS WEEKThe data that decides who's right
| WED JUN 24 · AMC ET | MICRON (MU) EARNINGS | High | A read on memory and AI demand. Sets the tone for chips. |
| WED JUN 24 · DAY ET | FEDEX · PAYCHEX | Medium | Logistics and payrolls: clues on spending and jobs. |
| THU JUN 25 · 08:30 ET | MAY PCE (CORE) | High | The Fed's favorite inflation print. Referee of the hike-vs-cut debate. |
| FRI JUN 26 · DAY ET | NIKE EARNINGS | Low | A read on premium-brand global spending. |
If the Fed is torn between hiking and cutting, these events tip the scale. Thursday is the big one.
- PCE
- — The Fed's preferred inflation gauge (personal consumption expenditures).
- CORE
- — Core inflation: excludes food and energy to show the trend.
- AMC
- — After Market Close: earnings released after the US close.
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- FED
- — Federal Reserve: the US central bank that sets interest rates.
- PCE
- — The Fed's preferred inflation gauge (personal consumption expenditures).