Markets expect the Fed to hike US rates tomorrow - only the second rate hike since the onset of the GFC. Below is how Deutsche Bank economist Torsten Slok expects the reaction to play out for investors. Under every scenario he sees US equities responding by moving higher. Also a 95% likelihood of higher oil and a higher US dollar. In short, he's saying reaction should be positive for growth assets (both commodities and equities).
It's all about the commentary and "dot plot" accompanying the rate rise. His 3 scenarios in the table are (1) hawkish: 55% likelihood (meaning FOMC signals more than 2 rate hikes in 2017) (2) neutral: 40% likelihood (two hikes signaled) and (3) dovish: 5% likelihood (none or only 1 rate hike).
John Berry, Director