Federal Reserve's Waller Makes His Debut: Four Major Scenarios for U.S. Stocks on Wednesday Explained at Once!
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By:美股投资网
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On Wednesday afternoon, it’s not just an ordinary FOMC meeting, but the first official appearance of the new Federal Reserve Chair, Warsh, before the global markets.
The key issue isn’t just about raising rates. What truly determines the direction of U.S. equities is whether he will hint at a second or even third rate hike in the future.
As of Tuesday, CME FedWatch shows there is a 69.5% probability of rates remaining unchanged on Wednesday, and a 30.5% probability of a 25 basis point hike.
The key issue isn’t just about raising rates. What truly determines the direction of U.S. equities is whether he will hint at a second or even third rate hike in the future.
As of Tuesday, CME FedWatch shows there is a 69.5% probability of rates remaining unchanged on Wednesday, and a 30.5% probability of a 25 basis point hike.
Standing pat is still the baseline scenario, but a nearly 30% chance of a rate hike means the market is far from fully prepared to rule out a surprise.
The rate decision will be announced on Wednesday at 2:00 PM ET; Warsh will hold his first press conference as Chair at 2:30 PM ET.
US Stock Investment Network believes Warsh’s primary goal this time is to show he takes inflation very seriously, but without causing a market stampede on his very first day.
US Stock Investment Network believes Warsh’s primary goal this time is to show he takes inflation very seriously, but without causing a market stampede on his very first day.
On Wednesday afternoon, there are roughly four possible scenarios. The first and most probable scenario: No rate hike, but a hawkish tone in his remarks, probability about 45%.
Warsh may emphasize that inflation is still above target, financial conditions have eased, and future policy decisions will be made meeting by meeting, reiterating that “policy is not on a preset course.”
In market terms: No hike today, but room for action is preserved for the next meeting.
In this scenario, U.S. equities may initially rebound due to the unchanged rates, but as Warsh delivers hawkish signals, short-term U.S. Treasury yields and the dollar may rise again. The Nasdaq and semiconductor sector could climb and then fall back, ending up in wide-range volatility.
The second scenario: A 25 basis point rate hike, but signals that it is a one-off adjustment, probability around 25%.
Warsh may explain the hike as a move to "maintain inflation credibility" or "recalibrate policy", while stressing that economic growth remains solid and further decisions will be data-dependent, not the beginning of a new cycle of tightening.
The initial response in U.S. stocks will likely be negative, with AI hardware, high-valuation tech, and small caps coming under greater pressure. However, if the press conference clearly signals "this is not a series of hikes," the market could quickly recover losses within half an hour or even deliver a relief rally.
The third scenario: No hike and a dovish tone, probability around 19%.
If Warsh stresses that inflation is improving, current rates are already restrictive, and there is no need to rush further action, U.S. Treasury yields may fall, the dollar weaken, and the Nasdaq and badly oversold semiconductor stocks could see a strong rebound.
But Warsh is newly appointed and needs to quickly establish anti-inflation credibility, so it’s unlikely he’ll go fully dovish in his debut appearance.
The fourth and most feared tail-risk scenario: A 25 basis point hike while also hinting at further tightening ahead, probability around 11%.
This would force the market to upwardly revise the entire rate path, with U.S. Treasury yields and the dollar rising together, and the Nasdaq, Philadelphia Semiconductor Index and high-leverage assets could face concentrated selling again.
The real pain for the market isn’t the 25 basis points, but investors suddenly realizing: this isn’t just a hike, it’s the start of a rate hike cycle.
US Stock Investment Network’s baseline expectation for the market:
If there is no hike, the recently battered semiconductor sector will likely see a technical rebound, but whether it holds depends on whether Warsh talks down the likelihood of a hike at the next meeting.
If there is a hike, the first wave market response will surely be negative, but as long as Warsh clarifies that policy isn’t moving into a continuous tightening mode, the most crowded de-leveraging trades could exhaust after the initial panic.
The most important thing Wednesday afternoon is not listening for Warsh to repeat "data-dependent," but to capture these three key signals:
Does he describe inflation as "still too high" or "improving";
The real pain for the market isn’t the 25 basis points, but investors suddenly realizing: this isn’t just a hike, it’s the start of a rate hike cycle.
US Stock Investment Network’s baseline expectation for the market:
If there is no hike, the recently battered semiconductor sector will likely see a technical rebound, but whether it holds depends on whether Warsh talks down the likelihood of a hike at the next meeting.
If there is a hike, the first wave market response will surely be negative, but as long as Warsh clarifies that policy isn’t moving into a continuous tightening mode, the most crowded de-leveraging trades could exhaust after the initial panic.
The most important thing Wednesday afternoon is not listening for Warsh to repeat "data-dependent," but to capture these three key signals:
Does he describe inflation as "still too high" or "improving";
Does he actively mention the next possible rate hike;
Does he define this policy move as a "one-off adjustment" or as "part of ongoing tightening."
The first two minutes after the rate decision will determine the initial market move. The next thirty minutes of the press conference will determine the true direction of U.S. stocks.
Does he define this policy move as a "one-off adjustment" or as "part of ongoing tightening."
The first two minutes after the rate decision will determine the initial market move. The next thirty minutes of the press conference will determine the true direction of U.S. stocks.
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US Stock Investment Network is a fintech company specialized in researching U.S. stocks, established in 2008 in Silicon Valley, USA. It was founded by former NYSE analyst Ken, together with several Morgan Stanley analysts and Google/Meta engineers, leveraging AI and big data along with over ten years of practical trading experience and industry quantitative models. It has built a stock market database that processes tens of millions of stock data daily: capturing large options trades, tracking real-time flows of major capital, institutional position changes, and breaking Trump-related news.
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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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