Fed Rate Hike Looms: What History Says About Market Reaction

Markets are expecting a rate hike from the Federal Reserve this week, but investors are uncertain about its implications.

With inflation at 3.4% and long-term Treasury yields spiking, the Fed's decision is seen as a foregone conclusion, with around 93% odds of a rate hike priced in.

However, the tone of Federal Reserve Chairman Kevin Warsh's speech at Jackson Hole has raised questions about how hawkish he will be in his policy decisions.

Investors tend to dislike rate hikes, but they may actually cheer one on this time as it would establish Warsh's credibility and commitment to fighting inflation.

If the Fed leaves rates unchanged, stocks could sell-off as investors might worry about inflation running too hot.