The Fed Rate Bet Traders May Regret

The Fed Rate Bet Traders May Regret Markets are convinced the Fed won't hike in September. Here’s why a month of data could flip that bet – and where the real trade is… Written by Larry Benedict Published on Aug 18, 2026 For the past couple of weeks, markets have become increasingly convinced that the Federal Reserve won’t raise interest rates at its September meeting. First came July’s surprisingly weak nonfarm payrolls report. Rather than adding 80,000 new jobs as expected, the economy shed 23,000 jobs. Then came softish inflation. The Consumer Price Index (CPI) rose just 0.1% month-over-month (MoM), while producer prices were unchanged. That caused expectations to shift dramatically. Just over a week ago, markets were about evenly split between the Fed raising rates a quarter-point in September or leaving them unchanged. But now, hike odds have dropped to around 30%, and investors have reacted accordingly. The S&P 500 recently clocked a new all-time high while the CBOE Volatility Index (VIX) has fallen to its lowest level this year. Clearly, investors are betting that the Fed will blink. But I think they need to be careful. The Fed’s meeting is still around a month away. And there’s a lot of data that markets will need to digest…

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Three Fed Officials Already Dissented The Fed didn’t unanimously agree to leave rates unchanged at its last meeting. Three officials dissented in favor of an immediate 0.25% hike. That tells you a group inside the Fed – a minority – is worried enough about inflation to want rates higher. And we can’t rule out Fed Chair Kevin Warsh joining them. In fact, I think he’ll plan to raise rates if the economic data justifies it. He also wants to send the market a message. He doesn’t want investors assuming the Fed will always hand them a clear roadmap for rates – or that policy will keep riding to the rescue. Between now and the next meeting, there’s another full cycle of monthly economic releases to come. These include the CPI, the Producer Price Index, and Personal Consumption Expenditures inflation data. And on the jobs front, there are job openings and payrolls to come along with the latest unemployment print. Then, there’s manufacturing, services, retail sales, consumer sentiment, and a broad array of other economic data. Any surprises could dramatically shift rate expectations higher again. And if folks aren’t careful, that could catch them off-guard. Tune in to Trading With Larry Live Each week, Market Wizard Larry Benedict goes live to share his thoughts on what’s impacting the markets. Whether you’re a novice or expert trader, you won’t want to miss Larry’s insights and analysis. Even better, it’s free to watch. Visit us on YouTube to catch the latest! What Markets Are Pricing In Now One theme I often write about is that markets don’t simply move according to whether news is good or bad. What really matters is how that news compares to what investors are expecting. Right now, investors are factoring in a relatively low probability that the Fed will hike in September. That’s what makes the current setup so intriguing. If incoming data continues to soften, then today’s expectations might prove correct. The Fed can remain on hold, and markets can simply carry on. But what happens if the numbers go the other way – like new jobs rebound strongly or oil prices start rising again, putting renewed pressure on inflation? A sudden repricing of interest rate expectations could push Treasury yields higher. Don’t forget, the U.S. 10-year has recently been pushing 4.7%. Another leg higher could put pressure on fully priced growth stocks and take some of that complacency out of the market. Stocks are at record highs, and the VIX at its yearly lows. Investors believe the Fed will telegraph its next move. That’s why markets are vulnerable, especially with a relatively new chair taking the Fed in a new direction. To be clear, I’m not guaranteeing the Fed will hike rates in September. There are too many factors to make that call right now. But I wouldn’t write it off. For traders, that’s where real opportunities lie… Because the bigger opportunity (and risk) isn’t necessarily the Fed raising rates in itself. It’s what happens when a market that has become convinced the Fed will blink suddenly realizes that it might not… Regards, Larry Benedict Editor, Trading With Larry Benedict Get Instant Trade Alerts on Mobile! Click the icon below from your mobile device to download The Opportunistic Trader app today for one-tap access to trade alerts, issues, and model portfolios for all of Larry’s services. Available in the app store on Android and iPhone. More stories like this Read the latest analysis on hot growth stocks, and market-moving developments How Delta and Gamma Move Your Options Trade The stock moves, but your option barely budges. Delta and gamma explain why – and why gamma goes wild as expiration approaches… Aug 17, 2026 • 3 min read Patience Paid Off on Our EUR/USD Trade We closed a long EUR/USD position for 189 pips. Here's how the Fed, a yen intervention, and an RSI signal set it up… Aug 14, 2026 • 4 min read This SMH Chart Level Will Decide the AI Trade Chip stocks led the AI rally, then gave back half of it. Here's the SMH chart level that decides whether the worst is over… Aug 13, 2026 • 3 min read 1125 N Charles St, Baltimore, MD 21201 www.opportunistictrader.com To ensure our emails continue reaching your inbox, please add our email address to your address book. This editorial email containing advertisements was sent to reunisoft.cryptonews@blogger.com because you subscribed to this service. To stop receiving these emails, click here. The Opportunistic Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-208-6550, Mon–Fri, 9am–5pm ET, or email us here. © 2026 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. Privacy Policy | Terms of Use