Fed Rate Hike in December Is Possible, Macquarie's Wizman Says

Macquarie’s Thierry Wizman suggests the Fed could still deliver a rate hike this year, arguing “December doesn’t look like the wrong time” ahead of the next Summary of Economic Projections (SEP) and updated dot plot. The key catalyst would be how the new dots/SEP shape the Fed’s direction, implying rates and yields remain sensitive to incoming inflation and economic data.

Analysis

The market mechanism here is not "one more hike" in isolation; it is a repricing of the terminal-rate distribution and the path of real yields. If the front end starts to believe policy stays tighter for longer, the first-order losers are long-duration equities and housing-linked cash flows, while the second-order winner is volatility itself: higher rate uncertainty tends to lift implieds in rates-sensitive ETFs and compress multiples in unprofitable growth. That is more relevant over the next 1-3 months than the event date itself.

The cleanest sector spillover is from mortgage rates into homebuilders, REITs, and small-cap cyclicals. XHB/ITB and IWM are the most fragile if a December hike probability climbs materially, while XLF is only a partial hedge because wider NIM can be offset by slower loan growth and worse credit quality, especially in CRE-exposed regionals (KRE). If this becomes a genuine policy path rather than a strategist call, the trade broadens from rates into earnings revisions.

Contrarian view: consensus may be overreacting to a tactical comment rather than a durable policy signal. The thesis is falsified quickly if core inflation cools or labor data softens over the next 4-8 weeks; in that case, the market will fade the hike premium and duration will rally hard. MQBKY is not the obvious direct expression; the better exposure is through rate-sensitive proxies, with the main risk being that the Fed keeps optionality and the market never gets enough conviction to sustain the move.

Key Decisions for Investors

• Tactically short TLT or buy 1-2 month TLT put spreads into the next CPI/PCE window; attractive if the market has not fully priced a December hike. Falsify if 10Y yield drops back below the recent pre-comment range or inflation prints roll over.
• Pair trade: long XLF / short XHB or ITB for 1-3 months. Higher rates should hit housing demand faster than they help bank NIM; cover if mortgage rates stop rising or mortgage application data stabilizes.
• Use KRE as the cleaner regional-bank hedge rather than XLF if CRE stress is your base case. Better risk/reward if credit spreads widen alongside front-end yields.
• If you want direct macro exposure, go long UUP versus a basket of rate-sensitive growth proxies (QQQ/ARKK) on a 4-8 week horizon; the trade works only if the Fed repricing is accompanied by firmer US data.
• No direct trade in MQBKY unless the view is that rate volatility boosts client activity; otherwise keep it on watch rather than as a catalyst-driven position.