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Will the Federal Reserve raise rates as expected this week? Wall Street is debating: will it end the U.S. stock bull market?

After an unexpectedly strong U.S. CPI report came out last Friday, traders generally expect the Federal Reserve to begin raising rates at this week’s policy meeting—marking the first rate hike in more than three years.

Historically, previous rounds of rate hikes have offered a reference point for today’s market. Based on past experience (though history of course can’t guarantee the future), U.S. stocks may first weaken, then rebound.

Among the six tightening cycles since 1994, during the first four months after the rate-hike cycle began, the S&P 500’s average return was negative.

This suggests that once the “rate-hike shoe” drops, U.S. stocks may look lackluster through the beginning of next year.

As of the close last Friday, the benchmark U.S. equity index, the S&P 500, is up nearly 12% year to date. Strong corporate earnings and a fairly resilient economy have provided solid support for bulls in the stock market.

If you extend the time horizon, the S&P 500’s performance tends to improve gradually: in the 12 months after the start of a rate-hiking cycle, the index’s average return is close to 7%, with a median return of about 11%. (Using median-based statistics helps remove distortions from extreme outliers—for example, the index surged more than 40% after hikes began in March 1997.)

If the Federal Reserve implements a rate hike this Wednesday, it will be the first hike since July 2023—when the Fed raised rates to a range of 5.25% to 5.50%.

Currently, the federal funds rate in the U.S. is at 3.50% to 3.75%. According to the CME Group’s FedWatch tool, futures traders currently assign an 86% probability to a 25-basis-point hike this week.

One positive factor for the market is that mega-scale cloud service providers are still driving growth in excess returns through large-scale AI spending. The S&P 500 component stocks’ forecast for earnings growth in 2027 is expected to reach double digits. If the outlook for AI spending remains unchanged, it may be enough to offset any cooling in optimistic sentiment caused by the rate hikes.

Another bright spot for equities is that although inflation remains sticky, it appears to be slowing. The inflation rate has fallen from a May peak of 4.2%. This should allow the Federal Reserve to take a more gradual approach, and the data shows that the pace of rate hikes is crucial for stock performance—slower pacing gives investors more time to absorb policy changes!
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Energy

The House Committee on Financial Services advanced the “American Reserve Modernization Act” (H.R. 8957) to the next stage on September 16, 2026 by a vote of 28 to 21. All “yes” votes came from Republicans, and all “no” votes came from Democrats.

The bill’s core content matches the reporting:
• The Treasury Department must establish a Strategic Bitcoin Reserve within 180 days, and also set up an independent Digital Asset Stockpile.
• Federal agencies must report the digital assets they hold within 60 days.
• For the Bitcoin included in the strategic reserve, it must not be sold, exchanged, auctioned, or used as collateral within 20 years.

The revised text is more restrained than the initial version:
• It does not authorize the government to buy Bitcoin; it only requires the Treasury and the Department of Commerce to study acquisition plans that do not “increase the burden on taxpayers.”
• The provisions to purchase more Bitcoin using Federal Reserve funds, to revalue gold certificates, and to buy Bitcoin with tariff revenue have been removed.
• The reserve proof report changed from quarterly to annual.

For now, it is only a “reported favorably” matter by the committee; it will not become law until it is approved by the full House, the Senate, and signed by the President.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​
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Elon Musk, the world’s richest man, is personally supervising the frontline. Musk even moved into a motorhome to oversee construction: xAI’s Memphis data center is the top priority for the world’s richest man.

In recent months, Musk has said he has been stationed in Memphis because SpaceX is ramping up to bring more GPUs online. He wants to live just a few steps away from the data center to save commuting time.

Earlier this year, SpaceX acquired xAI and transformed into a company focused on both aerospace and artificial intelligence. After going public, it announced massive investment in AI data centers, and the Memphis project, Colossus, is one of its flagship data centers.
SpaceX president Gwynne Shotwell said this is exactly the kind of thing Musk would do—things people don’t expect, including sleeping in factory workshops and even building a house next to Memphis.

According to the Bloomberg Billionaires Index, Musk’s net worth is $91.7 billion, and in June he became the first trillionaire in the world—a record that lasted 12 days.

However, his living arrangements are actually quite simple. Musk sold most of his real estate in 2020. After acquiring Twitter (later renamed X) in 2022, he had been living at the company’s headquarters in San Francisco. Over the years, his primary residence has been a rented house near SpaceX’s Starbase in Texas, costing about $50,000 in rent.

During the Tesla production ramp-up in 2017 and 2018, Musk even laid out a makeshift sleeping area near the production site. He said it was extremely crazy at the time—they could only sleep four or five hours per day, and they often slept on the floor.

And this around-the-clock work pattern seems to be playing out again in the Memphis data center project. SpaceX is accelerating the expansion of its massive supercomputing center, Colossus. Originally intended to provide xAI with extremely powerful computing capabilities, it now has expanded its capacity-lease business to Google and Anthropic, offering clients the remaining computing power for billions of dollars.

xAI began building Colossus in 2024, and it’s reported that the initial construction phase of Colossus took just 122 days. Given that SpaceX’s space-focused data center may still be a long way off, Colossus has already become SpaceX’s most critical AI project.
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