Will the Fed Hike Rates? This Expert Says No — And Stocks May Win

Wall Street is preparing for higher interest rates — but what if they never arrive? That's the bold prediction in this analysis, and it could be great news for investors.

First, the basics. The Federal Reserve (the U.S. central bank, which controls the country's money supply) raises or lowers interest rates to manage the economy. Higher rates make borrowing more expensive and help cool down inflation (the rising cost of everyday things like food, rent, and gas).

Right now, many big banks like Bank of America expect the Fed to raise rates three times in 2026 — small increases of 0.25% each in September, October, and December. But the author believes they're wrong.

Here's why:

• Inflation may be cooling, not heating up, despite scary headlines.
• The new Fed chair, Kevin Warsh, prefers a special inflation measure called "trimmed-mean PCE" (a calculation that removes the most extreme price swings to give a clearer picture).
• By that measure, inflation is just 2.4% — much lower than the standard "core" reading of 4.1%.
• Oil prices (a major driver of inflation) dropped from $96 to $70 per barrel.

There's another clue from the bond market (where investors buy and sell government debt). After a recent "hot" inflation report, the 2-year Treasury yield (a key signal of where rates are heading) actually *fell* — suggesting investors think the worst is already behind us.

Other Fed officials agree. New York Fed President John Williams expects inflation to "edge down," and St. Louis Fed President Christopher Waller said he's happy to stay patient.

So what does this mean for your money? If the feared rate hikes never come, certain stocks could jump. The biggest winners would be rate-sensitive sectors — companies that do better when borrowing is cheap:

• Real estate
• Utilities (power and water companies)
• Technology

The bottom line: The market may be bracing for pain that won't happen. If so, stocks — especially in these sectors — could have hidden room to rise.

This is an AI-generated summary. Read the original article at: https://www.marketwatch.com/story/wall-street-is-bracing-for-a-wave-of-fed-rate-hikes-that-may-never-come-these-sectors-stand-to-gain-63229922?mod=mw_rss_topstories