Why a hawkish Fed isn't scaring Wall Street

• Standard Chartered forecasts the Federal Funds rate will remain at 3.5%-3.75% through 2026, with only a single 25-basis-point cut expected in H1 2027, and projects the S&P 500 to reach 7,950 by mid-2027.
• Goldman Sachs, Citigroup, and UBS have all delayed their rate-cut forecasts, now expecting cuts no earlier than late 2026 or 2027, compared to previous expectations for earlier easing.
• Bitcoin fell from above $67,000 to near $62,000 and gold futures dropped 1.8% to around $4,173/ounce as higher real yields and a stronger dollar weigh on non-yielding assets, while equities push toward record highs.

Summary

Key Development:

Wall Street equities remain resilient despite major banks pushing Federal Reserve rate-cut expectations into 2027. Multiple institutions have revised their forecasts, abandoning near-term easing expectations while maintaining constructive equity outlooks.

Specific Forecasts:

• Standard Chartered expects the Federal Funds rate to stay at 3.5%-3.75% through 2026, with one 25-basis-point cut in H1 2027, and forecasts the S&P 500 reaching 7,950 by mid-2027
• Goldman Sachs now projects no rate cuts in 2026, with reductions in June and December 2027
• Citigroup anticipates cuts beginning October 2026
• UBS expects cuts in March and June of next year

Economic Backdrop:

U.S. Q2 growth is tracking around 2.2% (annualized), with full-year growth expected at approximately 2.1%. Economic resilience is supported by AI-related capital expenditure, recovering labor markets, and increased manufacturing activity.

Market Implications:

Equity strength contrasts sharply with struggling alternative assets. Bitcoin fell from $67,000 to near $62,000, while gold futures dropped 1.8% to around $4,173 per ounce. Higher borrowing costs are pressuring non-income-generating assets as cash and fixed-income yields remain elevated.

Investment Rationale:

Strategists believe strong corporate earnings growth and AI spending can sustain equities despite higher-for-longer rates. Standard Chartered maintains an overweight position on global equities, favoring U.S. and Asia ex-Japan stocks. Markets are pivoting from rate-cut reliance to fundamental earnings growth as the primary driver of valuations.