Wm weekly market view rising risk of a fed rate hike 04 september 2026

WS Global CIO Office 4 September 2026

Rising risk of a Fed rate hike  Fed Chair Warsh has raised the chance of a rate hike this year, potentially as early as this month if August payrolls remain resilient and if there is no clear sign of disinflation.

 However, we see little scope for multiple hikes, given our view that disinflation is likely to continue into next year as the impact of tariffs and high oil prices fades.

 Thus, any such ‘defensive’ rate hike is likely to be neutral for equity and bond markets, which are already partly anticipating one.

 We would adopt a ‘buy on dips’ strategy for equities on any seasonal or pre-election volatility spike amid a Is it time to take profit in robust earnings outlook. Taiwan equities?

 In bonds, we gradually extend the maturity profile to 3-7 years, preferring Do you expect the US 30-year corporate credit, as yields in this bond yield to break above its 20-year high of 5.4%? segment have risen to attractive levels. In FX, AUD is our preferred currency amid rising global rates as markets underestimate the scope of further RBA Which currencies stand to rate hikes. benefit the most from hawkish central banks?

Important disclosures can be found in the Disclosures Appendix.

Standard Chartered Bank WS Global CIO Office | 4 September 2026

Charts of the week: Contained bond volatility, robust earnings As long as US bond market volatility remains contained, the equity rally is likely to continue amid robust earnings growth S&P500 index, US bond market volatility (inverted) Consensus estimates for S&P500 earnings and revenue growth 7,900 7,748 50 60%

Index (inverted) 7,500 74.7 40% 80 Index 30%

earnings growth (y/y) 7,100 95 20% 20% 6,700 10% 10% 110 0% 6,300 125 Q1'26 Q2'26 Q3'26 Q4'26 Q1'26 Q2'26 Q3'26 Q4'26 Sep-25 Jan-26 May-26 Sep-26 Earnings growth Revenue growth SPX Index MOVE Index (RHS) 28-Aug 1-Jul Source: Bloomberg, LSEG I/B/E/S, Standard Chartered

Editorial Rising risk of a Fed rate hike to a September or a future hike underscores the disinflationary outlook. Also, multiple rate rises could prove counterproductive Strategy summary: Fed Chair Warsh has raised the chance of by lifting already record US government borrowing costs as the a rate hike this year, potentially as early as this month if August Treasury continues to shorten maturities of its bond issues. payrolls remain resilient and if there is no clear sign of disinflation. However, we see little scope for multiple hikes, Gradually extend maturity in bonds: The latest rise in short- given our view that disinflation is likely to continue into next year to-medium term bond yields is thus an opportunity to gradually as the impact of tariffs and high oil prices fade. Thus, any such extend maturities in bonds, given our outlook for disinflation and ‘defensive’ rate hike is likely to be neutral for equity and bond limited upside for policy rates. We extend our preferred maturity markets which are already partly anticipating one. bucket to 3-7 years from 3-5 years. We continue to prefer corporate bonds, where we are comfortable in going down to We would adopt a ‘buy on dips’ strategy for equities on any BB-rated USD-denominated credit, which offer 6.5-7.5% yield. seasonal or pre-election volatility spike amid a robust earnings outlook. In bonds, we gradually extend the maturity profile to 3- Buying any September dip in equities. Rising bond yields, 7 years as yields in this segment have risen to attractive levels. seasonal weakness in September and pre-midterm election blues are potential near-term headwinds for equities. However, Setting the stage for a Fed hike: At Jackson Hole, Fed Chair equities have historically held up well despite higher bond yields Warsh opened the door to a potential rate hike, noting that rates as long as bond volatility is contained and growth resilient. are not restrictive, employment remains near full and underlying inflation is still elevated. We see just over 50% chance of a rate In fact, history suggests taking advantage of any weakness in hike, potentially on 16 September, if key US data before then September to build long-term exposure as underlying earnings are supportive – specifically, if…