On Wednesday, September 16, a massive catalyst will come to pass.
We don’t know what the outcome will be. But the market has already chosen.
And I have a plan to trade it.
This event has been on the calendar for months. But events from the last few days all-but solidified a specific outcome.
And in true Wall Street fashion… the market is betting on it.
I’m not going to gamble with the biggest names in finance. There’s too much at stake for an individual trader.
Instead, I’ll wait for the catalyst to pass and trade the revealed reaction.
FOMC Decision
At 2:00 PM ET Wednesday, the Fed will announce its decision.
The market thinks it already knows the answer: a hike.
CME’s FedWatch tool puts the odds of a quarter-point increase at 90.7%, and a Reuters poll found 85% of economists expect the Fed to raise its target range.
That would be the first hike since July 2023. Six weeks ago this wasn’t even on the table.
How we got here:
The funds rate has been at 3.5%–3.75% all of 2026.
But at July’s meeting, three FOMC members dissented. They wanted rates higher due to sticky inflation.
Then at Jackson Hole, Chair Kevin Warsh called the 2% PCE objective a fixed target and mentioned inflation was currently running at 3.7% over twelve months and 4.1% over six months.
A blowout August payroll announcement (162,000 jobs created versus an estimate near 53,000) was the next catalyst to point toward a hike. Growing businesses point toward an economy thriving amid inflation.
Then the August PPI came in at 5.4% annually. And last Friday’s CPI sealed it. Headline inflation hit 3.4%, hotter than forecast.
The Iran war is causing this inflation spike. Traffic through the Strait of Hormuz has collapsed to around a dozen vessels a day, and U.S. crude is up more than 50% since the war began on February 28.
And diesel just hit a record $6 a gallon.
Diesel inflation is one of the scarier numbers. It powers the trucks, farms, freight trains and heavy equipment that keeps the country running. It’s a factoring cost for almost every physical product in the country.
My Strategy
With all of the scary inflation numbers circulating, it’s no wonder Warsh would hike interest rates.
But what does that mean for us as traders?
Well, usually a rate hike is bad for business. Which would be a bearish catalyst for the market.
But… It seems most of the market is prepared for a rate hike. Which means the catalyst is already priced in.
That would explain the lackluster price action in the market recently:
If the Fed hikes interest rates on Wednesday afternoon, I’m looking for a bounce in the QQQ due to a bearish catalyst that’s already priced in.
A lack of sellers creates too many buyers.
Stay Street Smart,
Jeff Zananiri
