How Fed expectations are changing
The probability of a rate hike in October has risen noticeably: after the data was released, the market raised the probability of a 25-basis-point hike in October to around 44%—47%, while the probability of holding rates remained above 50%. In other words, a rate hike is a significant risk, but has not yet become the market’s established base case.
The policy path is becoming more hawkish: traders have begun betting on further rate hikes through the end of 2027, indicating that the market is no longer simply expecting “rapid rate cuts as soon as inflation rises.”
Key points to watch: the October 27—28 policy meeting, subsequent inflation, employment, and consumption data, as well as comments from Fed officials. If the data weakens, the Fed may still hold rates in October; if inflation continues to exceed expectations, the probability of a hike will rise further.

Which of the three asset classes is more affected
U.S. stocks: Technology and growth stocks face the greatest pressure. Higher rates reduce the present value of future earnings, and the Nasdaq is more sensitive to real interest rates. AI-related stocks are also facing concerns over rising financing costs, limiting their short-term upside.
Gold: Under pressure in the short term, but its safe-haven appeal remains. Higher rates and a stronger dollar reduce the appeal of non-yielding gold, so gold prices weakened temporarily after the CPI release. However, geopolitical risks, energy prices, and central-bank gold purchases may still provide support, making gold likely to be more stable than U.S. stocks.
BTC: It has the greatest volatility and the least clear direction. It is affected simultaneously by liquidity expectations, U.S. stock sentiment, and the dollar. After the CPI release, Bitcoin fell below $82k, while crypto-related indexes posted even steeper declines, indicating that it is currently being treated as a high-beta risk asset. It is more like an “amplifier of market sentiment” than an asset that simply follows a single macro variable.

In terms of positioning
It is currently more appropriate to control position sizes and retain cash while waiting for two signals:
1. Market repricing: Treasury yields, the dollar, and rate-hike probabilities stabilize, while panic sentiment stops intensifying.
2. A stabilizing price structure emerges: The S&P 500 and Nasdaq end their consecutive declines, gold holds key support, and Bitcoin reclaims and stabilizes around $84,000. If the Fed ultimately pauses rate hikes in October while inflation does not fall rapidly, the market may enter a volatile “higher for longer” phase—the assets that suffered valuation compression first stabilize, while rebounds in growth stocks and cryptocurrencies become more erratic.
Control position sizes first and avoid trying to guess the absolute bottom; wait until rate-hike probabilities peak and Treasury yields flatten before entering positions in batches.

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