There's a 35% Chance That the Fed Hikes Rates at Least 4 Times by September 2027, Which Can Decimate the AI-Driven Bull Market

The Federal Reserve has started a rate-hiking cycle under Chair Kevin Warsh, and markets now price a 35% probability of at least four quarter-point hikes by September 2027. That tail risk lands on an AI-driven bull market already described as historically expensive.

The article attributes the hawkish turn to persistent inflation tied to Trump's tariffs and to geopolitical tensions. Those two forces are the stated catalysts keeping the Fed on a tightening path rather than easing.

Here is the transmission channel the source highlights: rising borrowing costs could slow AI infrastructure investment. That investment has underpinned recent stock market gains, so higher financing costs threaten the spending that has supported equity leadership.

Interpretation: a 35% probability is not a base case, but it is large enough to matter for risk pricing. Four hikes would total a full percentage point of tightening, which would raise the discount rate applied to richly valued growth stocks. For CME, the rates category tag signals that a shifting hike path is the relevant variable, since repricing of Fed expectations drives hedging and positioning demand across rate instruments.

The source frames the risk as a threat to the bull market itself, not a marginal headwind.