What a Fed Rate Hike Could Mean for US Stocks

September 11, 2026

AI Summary

5 min read

What a Fed Rate Hike Could Mean for US Stocks

On the Goldman Sachs trading floor, cross-asset sales head John Sugar joined Chris Hussey to break down what the September CPI report means for the Federal Reserve's next move and how equity markets are positioned heading into a potential rate hike. The conversation cut through the noise around inflation data, AI-driven earnings, and the structural risks lurking in the long end of the yield curve.

The CPI Report and the Fed's Dilemma

The market reaction to the CPI print told a clear story: investors are pricing in an 84% probability of a rate hike at the next FOMC meeting, with 50 basis points of tightening expected by year-end. Sugar noted that while shelter inflation has moderated and goods inflation cooled, the hot print was driven by categories like communication services. The more dangerous path for the Fed, he argued, is actually not hiking. "You might lose control of the back end," he said, referring to the long end of the yield curve. The Fed controls the front end through the federal funds rate, but the back end is governed by market forces. If the Fed hesitates and the market decides rates need to go higher on their own, the move could be abrupt and disorderly.

Equities: Flat but Not Broken

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What you'll learn

1 (00:46) **Cross-Asset Sales Defined** - John Sugar explains his team’s role in capturing market inflection points.
2 (01:37) **CPI Report and Fed Rate Hike Odds** - Chris and John analyze the market reaction to the CPI report ahead of the FOMC meeting.
3 (02:34) **Equities Market Flatlining** - Discussion of the stock market’s stagnation since early August.
4 (03:09) **AI and Earnings-Driven Rally** - John argues the market’s heavy lifting is done by earnings, not multiple expansion.
5 (03:50) **Deglobalization and Geopolitical Risks** - Examining how geopolitical events affect market behavior.
6 (05:27) **Largest Risk: The Back End of the Yield Curve** - John identifies the biggest risk outside of tail events.
7 (06:12) **Hedging the Back-End Risk** - Two specific hedging strategies are outlined.

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Show Notes

Investors are pricing in a higher likelihood that the Federal Reserve will hike rates after core CPI inflation rose in August more than economists had estimated. However, a rate hike may not keep the US stock market from climbing higher, says Jonathan Shugar, head of Cross Asset Sales in Goldman Sachs FICC and Equities, on The Markets podcast. Companies reported strong earnings growth in the second quarter, and valuations near the 10-year average are not stretched, he explains. Shugar also discusses why a Fed hike may not restrain investment in artificial intelligence, the risks in longer-term interest rates, and the potential opportunity for investors in consumer experience stocks.

This episode was recorded on September 11, 2026.

The opinions and views expressed herein are as of the date of publication, subject to change without notice, and may not necessarily reflect the institutional views of Goldman Sachs or its affiliates. The material provided is intended for informational purposes only, and does not constitute investment advice, a recommendation from any Goldman Sachs entity to take any particular action, or an offer or solicitation to purchase or sell any securities or financial products. This material may contain forward-looking statements. Past performance is not indicative of future results. Neither Goldman Sachs nor any of its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the statements or information contained herein and disclaim any liability whatsoever for reliance on such information for any purpose. Each name of a third-party organization mentioned is the property of the company to which it relates, is used here strictly for informational and identification purposes only and is not used to imply any ownership or license rights between any such company and Goldman Sachs.

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