Rate Hikes Won't Crush Stocks, Say Wall Street Pros

Wall Street pros say investors shouldn't fret about rate hikes this year. With a high probability of interest rate increases, some experts argue that stocks can weather the changes just fine.

The Federal Reserve is expected to raise rates at least once in the remaining months of 2026, with markets pricing in a 71.8% chance of a hike at its September meeting and 63.5% odds of at least two hikes by December.

Historically, rate hikes have been bad news for stocks, but one positive factor is that AI spending from hyperscalers is still driving outsized earnings growth. S&P 500 earnings growth expectations are in the double digits for 2027, which could counterbalance any dampening optimism from rate hikes.

Another point in favor of stocks is that inflation, while sticky, seems to be moderating. It's down from a peak of 4.2% in May, allowing the Fed to move slowly and giving investors more time to process the moves.