Reasoning
The Federal Reserve, under Chair Kevin Warsh, has maintained its target range at 3.50 to 3.75 percent and eliminated its prior cutting bias. The June 2026 Summary of Economic Projections (SEP) median now indicates a year end 2026 funds rate of 3.8 percent, with nine of eighteen SEP participants projecting rates above the current target range. This hawkish shift, coupled with a current S&P 500 level of 7,684, suggests an increased probability of market repricing downwards as investors adjust to a higher for longer interest rate environment, making a 10% peak to trough decline in H2 2026 more likely.Key uncertainty
The actual trajectory of inflation in the latter half of 2026, which could force a policy pivot from the Fed or reinforce its current stance.