Wall Street Expects Bad News From the Federal Reserve This Week. History Says a Stock Market Correction May Follow.

CME Group's FedWatch tool shows an 87% probability the Federal Reserve will raise interest rates by a quarter-point this week. Historical patterns suggest risk ahead: the first rate hike in new tightening cycles has preceded double-digit stock market corrections within three months.

The setup mirrors previous tightening episodes where equities initially held up before selling off. However, current market conditions include strong corporate earnings growth and AI-driven technology sector performance that could cushion against historical precedent.

CME (CME), which operates the derivatives exchange hosting the widely-watched FedWatch tool, provides the market's real-time assessment of Fed policy expectations. The 87% probability reflects futures pricing on Fed funds contracts, a key barometer for institutional positioning ahead of the central bank decision.