Wall Street strategists are torn on whether the stock market is about to crash or soar 20% ahead of next week's Fed meeting. Here's where 6 market experts stand.

NYSE trader
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  • Ahead of the Fed's anticipated interest rate hike next week, Wall Street investors are torn on the outlook for stocks.

  • Some Wall Street strategists expect a sharp rebound in stocks by year-end as inflation cools off.

  • That conflicts with the view of Ray Dalio and Scott Minerd, who say the S&P 500 can fall an additional 20%.


Ahead of the Federal Reserve's highly anticipated 75 basis point interest rate hike next week, Wall Street is torn as to where the stock market is headed next.

Concerns are growing that the Fed will over tighten interest rates at a time when the economy is showing signs of weakening, and that could lead to a massive stock market decline.

But persistent inflation leaves some professional investors to believe that the Fed needs to ignore stock market volatility and maintain its credibility by continuing to raise rates until inflation shows adequate signs of cooling off.

"Lessons from the 1970's tell us that premature easing could result in a fresh wave of inflation, and that market volatility in the short-run may be a smaller price to pay," Bank of America's Savita Subramanian said on Friday.

Here's where the bulls and bears of Wall Street stand on inflation, interest rates, and where the stock market is going into year-end ahead of next week's FOMC meeting.

The Bears

1. Ray Dalio: Expect a 20% sell-off in the stock market if rates keep rising.

Ray Dalio on the Forum stage during day two of Web Summit 2018.
Ray Dalio on the Forum stage during day two of Web Summit 2018.

Bridgewater Associates hedge fund manager Ray Dalio.Eoin Noonan/Web Summit via Getty Images

"With inflation well above what people and central banks want and the unemployment rate low, it's obvious that inflation is the targeted problem, so it's obvious that the central banks should tighten monetary policy. Everything will flow from that," Dalio said on Wednesday.

"I estimate that a rise in rates from where they are to about 4.5% will produce about a 20% negative impact on equity prices," Dalio said.

2. Scott Minerd: A 20% decline in the S&P 500 could happen by mid-October.

Scott Minerd
Scott Minerd

Guggenheim chief investment officer Scott Minerd.Photo by PATRICK T. FALLON/AFP via Getty Images

"It's really stark to see the price-to-earnings ratio where it is... given where seasonals are, and how far out of line we are historically with where the p/e is, we should see a really sharp adjustment in prices very fast," Minerd said last week.

"It appears people are ignoring the macro backdrop, monetary policy backdrop, which would basically indicate that the bear market is intact. We may very well already be in a recession... with YoY core PCE now at 4.6% and S&P 500 trading at ~19x, we should see stocks fall another 20% by mid-October," Minerd said.