Surprise Fed Rate Hike Can't Be Ruled Out; What It Means For S&P 500

The article focuses on how a potential surprise Fed rate hike under new Chairman Kevin Warsh could affect the S&P 500. Deutsche Bank sees a 36% chance of a 25 bp hike at the upcoming FOMC meeting, versus 64% odds of no change. Markets also price an 80% chance of at least one hike by September and elevated odds of more tightening into 2026. The piece argues that an unexpected hike would likely pressure the S&P 500 initially, especially if investors interpret it as the start of a tightening cycle rather than a one-off move. It also notes that the Fed’s June minutes highlighted risks of persistent inflation from strong AI investment, Middle East conflict, tariffs, and high energy prices, which could justify more policy firming.