S&P 500 Analysis: The Fed Changed Nothing, Yet Stocks Felt the Shock
Key Points:
- Cautious view on the S&P 500 into the September 16 FOMC meeting. Base case: a retest of the April 29 close near 7,135, roughly 4% below the June 17 close, over the next two to three months.
- The proven driver: the SEP turned hawkish. The 2026 median funds rate rose +40bps, 2027 rose +50bps, and 2026 PCE inflation rose +90bps in one release.
- Warsh's communication changes no chair dot, no forward guidance, a shorter statement may amplify future Fed-day volatility even without fresh hawkish content. June 17 is not that test.
- The backdrop raises the stakes either way: CAPE near 41 , a level exceeded only near the 1999 peak; the S&P earnings yield has fallen below the 10 year Treasury yield for the first time in over three decades.
On June 17, the Federal Reserve did the single most boring thing a central bank can do on the rate itself: it changed nothing. Same target range, an outcome futures had priced at 97% odds days in advance. The S&P 500 still dropped 1.21% that afternoon, the VIX jumped over 12%, and two year yields also rose 16 basis points. The reason isn’t surprising. The quarterly projections released alongside the decision turned meaningfully hawkish, on the funds rate, on inflation, on the hike versus cut odds, and that alone is enough to explain the move. What’s genuinely uncertain, and worth separating from what’s proven, is whether the new chair’s communication style adds a second layer of risk on top of that. Below: what actually happened, what’s still just a hypothesis, and the level worth watching into autumn.