The Federal Reserve is set to hold a policy meeting this week. According to analysis by Macro Risk Advisors, if the central bank raises interest rates, it could trigger a pullback in the S&P 500 index—with an initial drop of 10% followed by another decline before year-end—as corporate profit margins are squeezed and earnings outlooks deteriorate while the market begins to brace for a new tightening cycle. Meanwhile, Morgan Stanley has shifted its stance, now projecting that the Fed will implement 25-basis-point rate hikes in both September and December.
The S&P 500 has fallen nearly 1% so far in September. September is historically one of the weakest months for U.S. stocks; recently, surging energy costs and heating inflation data have pushed the yield on the 10-year U.S. Treasury note above 5%—a level not seen since 2023.