Macro Risk Advisors: Fed Rate Hikes Could Trigger 8-10% S&P 500 Pullback
nashnova research
Macro Risk Advisors CEO Dean Curnutt warns the S&P 500 could drop 8%-10% after the Fed hikes this week, with a second leg down in December marking the critical test for this correction cycle.
How far could the market fall after this hike?
Curnutt told clients Monday the S&P 500 could pull back 8% to 10% once the Fed raises rates this week.
He argues the hike will "compress margins for companies that cannot pass on costs," delivering a volatility shock to a market unprepared for tightening.
This means → firms with thin margins and weak pricing power take the first hit. The key question for investors: who can't absorb rising costs?
How have rate-hike expectations shifted?
Markets now almost fully price in Fed Chair Kevin Warsh announcing a 25-basis-point hike on Wednesday. Just one week ago, that probability sat at roughly 60%.
This means → the hike itself is priced in. The real risk lies in what comes after — the tone of the statement and the shape of the dot plot.
How bad is the September backdrop?
The S&P 500 is already down nearly 1% in September, historically the weakest month for US equities.
Energy costs remain elevated, inflation data run hot, and the US 10-year Treasury yield has breached 5% — the first time since 2023.
In plain terms = stocks have entered the calendar's roughest stretch, oil and inflation are piling on, and a surging bond yield signals money is migrating out of equities and into bonds.
Could the 2018 playbook repeat?
Curnutt draws a direct parallel with 2018: the S&P 500 peaked in September that year, plunged roughly 10% through October–November, then fell again in December for a peak-to-trough decline of nearly 20%.
He warns the 2018 "Santa Claus rally never arrived," and today's "K-shaped, low-liquidity economy" sets the stage for a repeat.
In plain terms = "K-shaped economy" means the rich and the poor are diverging like the arms of the letter K — the top keeps rising, the bottom keeps falling. The headline numbers look fine, but the foundation is fragile.
What should investors do now?
Curnutt states plainly in his report: "Defensive positioning is the right response."
He expects a second leg down if the Fed hikes again in December, calling it the critical confirmation point for this correction.
This means → in his view, this is not a one-off shock but potentially a two-to-three-month downcycle, with December as the watershed.
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