In recent weeks, economic data, such as the significantly stronger-than-expected jobs report, pushed the public to expect an interest rate hike following the September Federal Open Market Committee (FOMC) meeting.
Reacting to the possibility, Dean Curnutt, chief executive officer and founder of Macro Risk Advisors (MRA), warned that an increase is likely to lead to a severe pullback in the U.S. stock market, with the S&P 500 expected to drop between 8% and 10%.
The analyst added that there is a possibility of a ‘second leg’ in the last month of 2026. Curnutt likened the expected downturn to the stock market performance in 2018, which, by December 31, saw a 25% pullback from the highs.
Notably, should the bearish scenario play out at and after the FOMC meeting, the S&P 500 could reverse from 7,619.98 at press time on September 15 to 6,857.98, effectively erasing all year-to-date (YTD) gains even before the later ‘second leg’ arrives.
Similarly, should the 2018 pullback repeat, the benchmark index could retrace to 5,714.99, a low not seen since the brief pullback in early 2025.
Fed now expected to increase interest rates by 25 BPS in September
Elsewhere, the MRA assessment appears like a serious sell alert for investors considering the recent shift in terms of the expected FOMC decision.
CME Group’s FedWatch shows 92.5% odds of the target rate rising by 25 basis points (BPS) on September 16 – from the 350-375 range to the 375-400 range. The only other outcome taken at all seriously and estimated at 7.5% is that the U.S. central bank keeps the rate steady.
The collective wisdom of prediction market traders appears to concur. Polymarket’s ‘Fed Decision in September?’ shot up from a 50/50 split between late August and September 10 to an 88% chance of a 25 BPS hike.
Top research firm forecasts 2027 bear market regardless of interest rates
Finally, some recent expert reports indicate that hedging against a broad stock market crash in the next 12 months could be a savvy move no matter the FOMC decision.
On September 10, Capital Economics economist James Reilly warned that the S&P 500 might be entering the final phase of the artificial intelligence (AI) ‘boom’ and that a reversal in late 2026 and 2027 is coming.
Specifically, the report warned that the benchmark index is first headed toward a new all-time high (ATH) of 8,250 through the remainder of 2026, but that a significant correction will drive it down to 6,500 by the end of next year.
This forecasted trajectory is the result of a comprehensive analysis of valuations, earnings, index concentration, equity issuance, and foreign interest – the company’s eight bubble indicators – which showed that some values are already at or close to highs seen at past market peaks.
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