$500 billion wiped from US equities at the open. Fed rate hike probability jumped to 74%.
Market's pricing in tighter policy faster than most expected. This isn't just a technical correction — it's repricing risk across the board. When rate hike odds move this aggressively, it cascades: higher discount rates mean lower present values for growth assets, especially anything long-duration.
What's interesting: the speed matters more than the absolute level. Markets can digest a 25bp hike. They struggle when the probability shifts 20-30 points in days. That's when positioning gets messy and forced deleveraging kicks in.
Watch credit spreads and volatility term structure. If this is just rates fear, equities recover once the hike is priced in. If credit starts widening or vol curve inverts, we're looking at something deeper — a liquidity or growth scare, not just a Fed story.
Market's pricing in tighter policy faster than most expected. This isn't just a technical correction — it's repricing risk across the board. When rate hike odds move this aggressively, it cascades: higher discount rates mean lower present values for growth assets, especially anything long-duration.
What's interesting: the speed matters more than the absolute level. Markets can digest a 25bp hike. They struggle when the probability shifts 20-30 points in days. That's when positioning gets messy and forced deleveraging kicks in.
Watch credit spreads and volatility term structure. If this is just rates fear, equities recover once the hike is priced in. If credit starts widening or vol curve inverts, we're looking at something deeper — a liquidity or growth scare, not just a Fed story.
