Wall Street Braces for More Fed Rate Hikes as Inflation Concerns Grow

Wall Street Prepares for More Fed Rate Hikes as Inflation Risks Persist
Wall Street is bracing for additional rate hikes this year after the Federal Reserve voted unanimously last week to raise rates. Michael Goosay, chief investment officer of global fixed income at Principal Asset Management, said "this may not be a one or two and done," adding it "could be something more substantial if they're truly trying to create demand destruction in order to get inflation under control."
Investors have priced in more than a 50% chance of another rate hike in October, and Fed officials project one more hike this year in their Summary of Economic Projections. Goldman Sachs economists said they now expect a second 25 basis point hike, changing their prior view that September would be the only increase, calling the meeting "more hawkish than we expected" and citing the unanimous vote and Fed Chair Kevin Warsh's remark that the hike "removed a dose of accommodation."
Strategist Ed Yardeni cut his year-end S&P 500 price target from 8,400 to 7,900, warning that "higher-for-longer oil prices continue to push bond yields higher" and could entrench inflation. Bank of America's Savita Subramanian raised her year-end target to 7,400, about 3% below current levels, citing a seasonally weak period and forecasting three rate hikes this year.
JPMorgan's Jordan Jackson advised a "healthy split between both growth and value names" and favors large-cap stocks over small caps in a higher-rate environment.