Navigating the Potential for a Rate Hike: The Investment Committee's Strategy 9/11/26

SPEAKER_1 (0:00)

At Edward Jones, we believe rich isn't about having life all figured out. It's opening yourself to all the possibilities. That's why your dedicated financial advisor provides long-term planning built around you, meeting you where you are, and helping you get closer to where you want to be. So no matter where you're starting from, you can move forward with confidence. The key to being rich is knowing what counts.

Let's find your rich. Edward Jones, member SIPC.

SPEAKER_2 (0:31)

Never bet against American grit or American energy. Through innovation, Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost and a fraction of the time. So while others are busy talking, we're busy building.

That's Venture Global.

That's unstoppable energy.

Scott Wapner (1:01)

Okay, guys, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center of this hour, the question I think on everyone's mind right now, is a rate hike inevitable? And if it is, how will stocks react? We'll ask the committee today. We'll also be joined in a bit by Altimeter's Brad Gerstner as he now weighs in on the great AI debate. Joining me for the hour today, Jenny Harrington, Jim Labanthal, Janet Sikosha, Kevin Simpson. Take you to the markets here. We are decidedly green, as you know, across the board today. There's the Dow and the S&P and the NASDAQ, all good for better than 1%.

We're pretty much brushing off that hotter than expected core CPI. Rate hike odds now go to 86%.

They were 71% before the print. Dare I say, it's almost as if the market wants a hike, thinks it's getting a hike, and is actually fine if it does get a hike. And it's almost as if the Fed doesn't hike, stocks are going to have a problem, Jim, rather than the other way around.

Jim Labanthal (2:06)

Yeah, because I think it's-

Scott Wapner (2:07)

Sounds crazy to say it, but is that where we are?

Jim Labanthal (2:09)

Yes, yes we are. And I think the reaction function that you're looking for on next Wednesday, if the Fed does raise rates, which is highly the probable case, is that long rates come down. And that's really what the market's looking for, is that the bond market says, okay, the Fed's on the case.

You know, and if they don't, I think you're going to see yields spike higher. Now, in terms of the equity market response, it's worth noting that usually it's not the first rate hike that does in the equity markets. Usually the equity market takes that in stride. It's when you get further in and the market realizes that the Fed's way behind the curve, that the equity markets start to fall out of bed. I don't think that's going to be the case right now, because we have to understand that this may not be so much an overheating economy that the Fed is attacking. Yes, it is with regards to AI build out, but the other factors here are ones that could be temporary, may be temporary. The effect on energy of the war with Iran, tariffs. That will have to play out, but the equity markets next week are likely to look at this as a preventative measure, not something where the Fed is saying, oh my gosh, we're behind the curves and we're going to have to raise massively.

Scott Wapner (3:14)

Bank of America today says time to hike, probably.

We don't think the Fed can credibly stay on hold. Now they have an out of consensus call, and they admit that the Fed will hike by 75 basis points this year, starting next week. Barclays today says better hike than wait.

Professor Jeremy Siegel of the Wharton School was on closing bell with me yesterday. He says he thinks the Fed should and will, and then I asked him, well, how's the market going to react? Here's what he said.

Jeremy Siegel (3:43)

I think the market will first shutter, and you'll see a sell off, and if, as I expect, that long bond reacts positively, saying, okay, the Fed is credible at fighting inflation, we're going to get a recovery in the stock market. All right.

Scott Wapner (4:03)

That's the professor. Jenny, is he right?

Jenny Harrington (4:07)

Well, I don't think so. I don't think he's right that the market will shutter.

The reason being, if there's 88 percent odds right now, of it already happening, the market's already digested it. And I think that's where we're at. I think the credibility is huge. And we all know you generally just don't raise rates when the economy is weak. So you've got, great, Fed's staying credible, market's already digested it. Why are they raising? Because the economy is strong. That's okay. You know, it's not great, but it's okay. It's for the right reasons. So I think we roll with it.