Potential Outcomes/Market response if Inflation moderates

Currently CME FedWatch is predicting a 61% chance for a 50-75 bps (I'm assuming that really refers to 50 bps) rate hike at the March 16th meeting. Goldman Sachs is saying a 50 bps hike in March is unlikely, but are predicting 7 rate hikes this year. Citi says 150 bps this year and 50 bps in March. Credit Suisse says 175 bps this year with 50 bps in March.

On the other hand, I'm hearing inflation has already peaked. Although inflation has increased dramatically, CPI is on the way down, and peaked back in October 2021. Some analysts argue it's a world problem and not a US problem, and when supply chains get sorted out inflation will moderate organically, at least to some extent.


  • 0.9 percent in October.
  • 0.7 percent in November.
  • 0.6 percent in December.
  • 0.6 percent in January.

Currently it seems like the market is pricing in the doom and gloom scenario of a 50 bps rate hike in March, and hikes at future meetings totaling 150-175 bps. On the off chance inflation starts to tick lower and the Fed can ease up on the aggressiveness, what parts of the market do well?

I think oil will do well in either situation, but I'm curious what others think. I wonder if we would see a return to high growth, even with rising interest rates.


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