Fed December Hike Odds at 86.8%: How Might Stocks React?
Traders see an 86.8% chance the Federal Reserve raises rates by a quarter point on December 9. Past hikes in 2015, 2018 and 2022 produced very different stock market outcomes, and the Fed's next signals may matter more than the move itself.
The Federal Reserve is widely expected to raise interest rates at its December 9 meeting, and investors are weighing how the market may react to a potential Fed hike. CME FedWatch data showed an 86.8% probability of a 25-basis-point hike, to a range of 4% to 4.25%, during trading on November 11.
A 50-basis-point hike, to 4.25%–4.50%, carried a 13.2% probability on the same measure. A basis point is one-hundredth of a percentage point.
Markets have already moved on shifting rate expectations. After October inflation came in above forecasts, the two-year Treasury yield jumped about 18 basis points on November 10, and the S&P 500 fell 0.38% that day.
The index rebounded 1.3% on November 11, helped by a rally in artificial intelligence stocks.
Three hikes, three different outcomes
History offers no single answer. On December 16, 2015, the Fed raised rates by 25 basis points for the first time in nearly a decade, and the S&P 500 rose 1.45%. Investors had expected the move, and the Fed signaled later hikes would be gradual.
On December 19, 2018, another quarter-point hike coincided with a 1.54% drop in the index. Investors worried about slowing growth while the Fed still projected more increases. Fed Chairman Jerome Powell also said the central bank would keep shrinking its bond holdings, which withdraws liquidity from the financial system.
The S&P 500 then gained nearly 28% over the following 12 months, as the Fed reversed course and cut rates three times in 2019.
In March 2022, the index rose 2.24% on March 16, the day the Fed began raising rates. It lost 9.1% over the next 12 months as inflation stayed high and the central bank sped up its increases. The Russia-Ukraine war, slowing global growth and recession fears also weighed on stocks.
What could matter more than the hike
A quarter-point move in December may have limited impact, according to the analysis. A surprise 50-basis-point increase, or signals of more hikes in 2027, could push Treasury yields higher and hurt stock prices.
In September 2026, Fed officials projected a median rate of about 4.1% at the end of both 2026 and 2027. New projections in December could show whether policymakers now expect more increases.
Pace matters too. A Charles Schwab report examined 18 Fed tightening cycles since World War II. The S&P 500's average maximum 12-month decline after the first hike was 16% in faster cycles and 12% in slower ones. Those figures measure the deepest declines, not full-year returns.
The economy gives companies some cushion. Inflation-adjusted gross domestic product grew at a 3.4% annualized rate in the third quarter, and employers added 165,000 jobs in October 2026.
Take the quizWhat Kind of Holiday Spender Are You? Take the Black Friday QuizStart →- 1Column: 4 Reasons to Eat Dark Chocolate, Dietitians Say
- 2Mavericks Surfers Race to California for Waves Near 50 Feet
- 3Meghan Markle Plans US Return to See Mother After Father’s Arrest
- 4Chrissie Swan, 52, Tears Up Over Secret Surprise While Recovering
- 5NYC Medical Examiner Has Not Determined Cause of Death of Beau Rose Jessup
Lifestyle7 Signs Your Social Battery Is Running Low (and Why You Keep Cancelling Plans)
Lifestyle · Food & HealthThanksgiving Food Safety: How Long Leftovers Last and the Safe Turkey Temperature
Lifestyle7 Quiet Habits of Emotionally Intelligent People, According to Psychologists
LifestylePeople Who Don’t Like Celebrating Their Birthday Often Share These 7 Traits
