Fedwatch signals quarter-point hike, markets May correct in coming months

The U.S. Stock market has posted strong gains this year, with the S&P 500 up 12% YTD, the Nasdaq Composite up 13%, and the Dow Jones Industrial Average up 9%.

FedWatch indicates an 87% probability that the Federal Open Market Committee will raise the federal funds rate by a quarter-point to 3.75%–4% at the September 16 meeting, potentially starting a new tightening cycle.

If a correction follows, past performance suggests investors can buy on the dip, as the S&P 500, Nasdaq, and Dow have historically entered correction territory within three months of the first hike. Strong earnings growth—15% revenue and 31% earnings for S&P 500 companies in Q2—may cushion the impact.

Read the full story at The Motley Fool.