Big corporations don’t like higher interest rates, because they raise borrowing costs and put pressure on the consumers buying their products. But experts are mixed on how a potential cut will immediately affect the stock market.
“We probably shouldn’t expect a large and immediate impact of a rate hike on stocks, since it’s already priced in,” said Bill Merz at U.S. Bank Asset Management.
He said capital markets have been anticipating higher rates for a while, and once the Fed starts, it’s not usually one-and-done.
“There’s a limit to what a single rate hike can do. Markets are already pricing in three to four rate hikes by next summer,” Merz said.
It’s an open question how much rate hikes might drag on business investment and consumer spending, which are key drivers of corporate profits and stock prices. But up until now, they’ve held up well.
“S&P 500 earnings — they’re expected to grow about 31% this year and about 14% next year,” Merz said.
Jan Groen, chief economist at Societe General, had a less sanguine view of what’s coming: “I mean, [a hike is] definitely not priced into stocks,” he said. “So we’ll see what’s going to happen tomorrow.”
New Fed Chair Kevin Warsh hasn’t established his credibility yet, Groen said. And so far, Warsh has shunned forward guidance about interest rates.
“The market is just not really believing the Fed, that they really will have the willingness to go all the way,” Groen said. | 
