The Fed hiked rates. Here's why it doesn't scare me

The Liquidity Map · Macro report

The Fed hiked rates. Here's why it doesn't scare me

On September 16, the Fed raised rates for the first time since 2023.

The internet read it as an alarm bell.

I think it's good news, just not for Bitcoin or the big indexes.

September 20, 2026 · 7 min read

Key takeaways

The Fed hiked rates a quarter point on September 16, to 3.75-4%, the first hike since 2023.
The 10-year yield hit 5.04% right before the decision, the highest level since 2007.
I think the Fed follows the market, it doesn't lead it. Short-term yields drove the move.
If rates stay elevated, I think the big winners won't be the large indexes or Bitcoin, but small and mid caps.
Between 1994 and 2000, with rates also in the 4-6% zone, the NASDAQ gained 550%, the S&P only 199%.
The Clarity Act, the US crypto regulatory bill, failed again in the Senate on September 15.
I don't think regulation matters for price. Bitcoin was already up 192% before the 2024 ETF approval.

On September 16, the Fed did something it hadn't done since 2023.

It raised rates.

The internet panicked immediately.

I have a different take, and it's not a popular one.

It ties directly to what I wrote in my previous report about 2027.

Let me show you why.

Definition

The Fed follows, it doesn't lead

The idea that the central bank doesn't set the direction of yields, it reacts to them. The short-term yield (US03M) moves almost identically to the Fed rate, with a small lag, while the 10-year yield (US10Y) is the one that anticipates. When US10Y climbs hard, the Fed catches up, not the other way around.

The decision

The hike the internet read as a disaster

On September 16, the Fed raised rates a quarter point, to the 3.75-4% band.

Unanimous vote, 12 to 0. The first hike since 2023.

The official reason: core inflation sits at 3.4%, headline at 3.7%, and energy prices climbed on the back of the US-Iran conflict.

16 out of 18 Fed officials see at least one more hike before year end.

A few days before the decision, I said a hike was "on the table," not certain.

Now it's done.

And the 10-year yield hit 5.04% right before the decision, the highest level since 2007.

3.75–4%The Fed's target band after the September 16 hike, the first since 2023.

To understand why it doesn't scare me, we need to talk about who follows whom.

The mechanism

The Fed follows the market, it doesn't lead it

The short-term yield, US03M, tracks the Fed rate almost exactly.

The gap between them stays inside a narrow band, under 30 basis points.

But the one driving the move is the 10-year yield, US10Y.

When US10Y climbs hard, the Fed catches up. Not the other way around.

US03M broke through its recent ceiling, toward 4%.

Exactly the kind of move that precedes a hike, not follows one.

That's how I read the September 16 decision. The market led, the Fed confirmed.

~3.94%The 3-month yield, US03M, close to the 4% threshold, right before the Fed raised rates.

US03M and US10Y yields, recent months. US10Y leads, US03M follows with a lag, almost matching the Fed rate.

If rates stay elevated from here, I don't think the big indexes are the ones that win.

Who wins

Not Bitcoin and the big indexes, this time

If another hike comes, I think a wall of worry sets in.

But not for the classic safe havens, big indexes, Mag7, Bitcoin.

This time I think the spotlight goes elsewhere: small and mid caps, the riskier names.

Everyone compares these hikes to 2022-2023. I think they look more like 2015-2017, or the 90s.

I checked the exact period I'm thinking of, 1994 to 2000.

The Fed hiked in 1994, held a plateau through 1998, then cut that fall.

The same pattern as now: a plateau, then a move.

Except after 1998, the Fed hiked again, toward 6%, right as the NASDAQ exploded toward its peak.

The NASDAQ, the risk index, gained 550% by the March 2000 peak.

The S&P 500, over the same stretch, only 199%.

Rising rates, but risk-on, not risk-off. That's what I'm watching for now.

550% vs 199%NASDAQ's return versus the S&P 500 between 1994 and the March 2000 peak, while the Fed hiked again toward 6%.

Top: NASDAQ Composite and S&P 500, indexed to 100 in January 1994, through the March 2000 peak. Bottom: the Fed Funds rate over the same window, showing the 1994 hike, the plateau through 1998, the cut that fall, and the new hike into 1999-2000.

2027 stays the year I'm watching for stocks, but these hikes make it harder to read.

2027

Same year, a bumpier road

I wrote in my previous report about why I see 2027 as the explosive year for markets.

The third presidential year, plus the last year before the Shmita window.

Nothing about this decision changes that thesis.

But rate hikes like this make 2027 harder to track, not less likely.

A path with rising rates isn't a straight line.

It's the kind of backdrop I saw in the 90s too, volatile along the way, but the overall direction up for risk assets.

I'm sticking with my 2027 thesis. I just expect more turbulence getting there, not a straight shot.

2027The year I'm watching for stocks, regardless of the turbulence these rate hikes bring along the way.

And if this hike is the start of a longer road, it lands right on my underlying clock.

The clock

2-3 years of rising rates, right toward Shmita

The Fed sat on a plateau from 2023 to mid-2025, then cut toward 3.6%.

Now it's hiked again.

If this move continues for a few years, it falls right on the Shmita window, which starts in September 2028.

I'm not saying it climbs in a straight line. I'm saying 2-3 years of rising rates, with ups and downs, would land right on my underlying clock.

It's the same structure as 1998-2000, just shifted in time.

A plateau, a cut, then a new phase of hikes that lasted until the market peak.

I'm not giving the exact number the rate reaches. I'm giving the direction and the window where it lines up with Shmita.

Sept 2028The Shmita window, my seven-year macro clock. A potential 2-3 year phase of rising rates, starting now, would land right there.

Fed Funds Rate, from 2023 to today, with an illustrative path, not a price prediction, showing a hike, a real pullback, and a new phase of hikes, converging toward the September 2028 Shmita window.

And while everyone watches rates, something else is happening in crypto, on the same theme of regulation mattering less than people think.

Clarity Act

The bill that stalled again, and why I don't care

The Clarity Act, the bill meant to bring clear rules for crypto in the US, failed again.

On September 15, the Senate's cloture vote came up short, 49 to 50. It needed 60.

The holdup is over stablecoin rewards and ethics provisions tied to the Trump family's crypto interests.

Bitcoin didn't need the Clarity Act to pump. It didn't need the ETF either, back then.

I'm looking at the precedent with the spot Bitcoin ETF, approved by the SEC in January 2024.

A day before approval, Bitcoin had already climbed 192% from its November 2022 low.

The market didn't wait for the paperwork. It pumped ahead, on structure, not on news.

I think the same is happening now with the Clarity Act. Price doesn't sit around waiting for the law.

192%How much Bitcoin had climbed from its November 2022 low to the day before the spot ETF approval, in January 2024. The market moved ahead of regulation.

Concretely, here's how I'm reading all of this together.

How we're positioned

The broad framework stays the one from my previous report, 2027 as the exposure year.

We're not changing anything today because of a single rate hike.

We're watching whether small and mid caps start beating the big indexes, the concrete sign this thesis is taking shape.

On crypto, we're not waiting on the Clarity Act as a buy signal. Structure matters, not the law.

Conclusions

The Fed raised rates, and the internet read it as bad news.

I think the Fed followed the market, it didn't lead it, and yields already showed the direction.

If rates stay elevated, I think small and mid caps take the spotlight, not Bitcoin or the big indexes.

The Clarity Act stalled again, the same way the Bitcoin ETF stalled before it. Price didn't wait then, I don't think it waits now.

2027 stays the year I'm watching, just with a bumpier road getting there than I hoped.

What to watch this week

Does another rate hike come before year end, the way 16 out of 18 Fed officials currently expect?
Do small and mid caps start beating the big indexes, a sign the risk-on thesis is gaining traction?
Does the Clarity Act move past its Senate blockage, or does crypto's price keep moving without it?

The Fed hiked rates. Here's why it doesn't scare me

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