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If the fourth rise in interest rates of 75 basis points is confirmed, as analysts’ expectations point out, the market could experience significant increases, as long as Powell’s message is moderate. According to the investment bank JPMorgan, if that scenario materializes, tomorrow’s increases could be between 4%-5%.

However, according to JPMorgan, the most likely scenario is that the Fed chairman adopts a more aggressive tone, leaving the dovish tone for the last meeting of the year, with which the market may be sideways.

According to the investment bank, the worst case scenario would be that the S&P 500 could fall by up to 8% in the event that the Fed opted for a rise of 100 basis points, signaling a lack of control over inflation. although he assigns few probabilities to said scenario.

A third scenario that the investment bank is considering, and almost unlikely, is that the Fed raised only 50 basis points, with which the market would shoot up around 10%. However, Fed Funds futures discount this possibility, with bets giving an 88% chance of a 75bp hike, pushing interest rates into a 3.25%-4% range.

Hopes for a dovish Federal Reserve swing are misplaced according to Lazard, considering the job openings posted today. As such, investors have a 75bps hike in mind as a central scenario, but will be watching the message to see if a hike of just 50bps could be in sight in December.

For his part, the Morgan Stanley equity strategist points to increases in the S&P 500 to 4,150 points, supported by estimates of earnings per share as well as the Fed meeting, which he considers critical for the stock market. As he points out, his estimates are that the index will remain between 4,000 and 4,150 points, which would imply an increase of more than 7%. It also signaled that the end of the Fed’s campaign to raise interest rates is drawing near, according to strategist Michael Wilson, until recently a noted bear who correctly predicted this year’s equity decline. Indicators, including the yield curve inversion between 10-year and 3-month Treasuries — a perfect-record recession indicator — “support a Fed reversal sooner rather than later,” Wilson wrote in a note. for customers.

According to Pimco, changes to the Fed’s public statements will be modest and that all attention will instead be on Chairman Powell’s discussion of the Fed’s plan to slow the pace of rate hikes. They expect Chairman Powell to signal the committee’s intention to slow the pace of rate hikes sometime relatively soon, before keeping rates high in 2023, while saying that politics does not have a pre-established course. They consider thatthe Fed faces a difficult balancing act in communication in the coming monthsas they try to balance the slowing rate of hikes without easing financial conditions too much, and as a result, Chairman Powell’s comments could sound hawkish relative to market participants looking for (expecting) a sharper turn from the Fed .As inflation is likely to remain elevated ahead of this eventual pause period, this will represent a step back from the data-driven Fed that market participants have grown accustomed to.in recent months.

Once Thursday is over, the next event is the mid-term elections, where the changes could be important, as pointed out in the note What is at stake in the US in the mid-term elections and how to play it via funds/ETFs? and where investors will be able to choose between actively managed investment funds and ETFs with exposure to value, large-cap and income companies.

reference: assetmanagers.estrategiasdeinversion.com

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