- JPMorgan sees a 95% chance of a rate cut this week, with dovish commentary most likely.
- A dovish cut could push stocks up 1% initially but lead to a 5% selloff later.
- Fringe scenarios include no cut or a jumbo 50 bps cut, both adding fuel to volatility.
Investors have been holding their breath all year for the Fed to restart its rate-cutting cycle, and this week looks like the moment. Markets are already pricing in a near certainty of a 25 basis point cut, with odds sitting above 96%. JPMorgan is echoing that confidence, saying there’s a 95% chance of a cut and about an 87% likelihood it’ll be the standard quarter-point move. The big unknown isn’t the cut itself, but the tone — dovish or hawkish commentary could shift markets in opposite directions.
Scenario One: The Dovish Cut
JPMorgan sees this as the most likely outcome, giving it almost a 50% probability. In this case, the Fed trims by 25 bps and strikes a dovish tone, signaling more easing ahead. Stocks could initially pop higher, with the S&P 500 gaining roughly 1% and touching around 6,650. But analysts warn that it might not last. Investors could “sell the news” later in the month, dragging stocks down as much as 5%. JPMorgan suggests watching tech (especially mega-cap AI names), utilities, healthcare, and biotech as possible buy-the-dip sectors.
Scenario Two: A Hawkish Cut
The second most likely outcome, with a 40% chance, is the Fed still cutting by 25 bps but layering in hawkish commentary. Powell might highlight concerns about the labor market or hint that cuts won’t come as quickly as markets hope. That would dampen enthusiasm, leaving the S&P flat or slightly negative, maybe down half a point. For traders banking on a rally, this would be a frustrating outcome that stalls momentum.
Scenario Three: The Wild Cards
A couple of fringe possibilities remain on the table. If the Fed holds rates steady (just a 4% chance), markets could tank 1–2%, sending the S&P toward 6,450. On the other hand, a jumbo 50 bps cut has a 7.5% chance. That could spark confusion — either a rally of 1.5% if markets see it as proactive, or a sell-off if investors read it as panic about a weakening economy. Either way, it would fuel volatility and probably more questions than answers.
Final Take
With the Fed meeting on deck, Wall Street is bracing for a wild session. Whether Powell delivers reassurance or stirs fresh worries, markets are set to move big. The only safe bet is that volatility will dominate Fed Day — and traders better be ready.
