What if the Fed surprises markets with a rate hike?
Hawkish surprise: an unexpected 25bp hike after markets priced cuts backs up front-end and real yields (~6bp on 2y) and sells rate-sensitive growth (Nasdaq, crypto). The rhyme is the surprise-tightening reactions of 2022-23 and BOJ's Mar-2024 exit shock — front end jumped and duration/tech sold. Transmission: higher US real rates bid the dollar and pressure EM and gold; forward angle — the surprise is the whole trade, so the move is a fast repricing that stabilizes once the new path is digested; the cleanest expression is short front-end / short high-beta into the print.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 0–6 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. The Fed delivers a surprise 25bps hike after markets had priced cuts. The trigger decomposes into signed root‑shocks — Fed policy path ▲ — which propagate through our causal graph to the markets below.