Trump vs The Fed: Markets Bet on Rate Hike

A key Federal Reserve meeting is approaching, and markets are pricing in high odds of a rate hike. However, Donald Trump has expressed his preference for lower rates, citing concerns about inflation.

SocGen's Manish Kabra notes that 'history argues for buying the hike' after a post-rate-hike adjustment period. According to Kabra, equities typically weaken over the next 1-3 months following a rate increase but tend to recover and reach new highs six months later.

The exception was in 2022, when the market struggled with a compressed tightening cycle. The S&P 500 has already de-rated by 15%, implying that the increases are not seen as significant by markets.