The Federal Reserve wraps up its Federal Open Market Committee (FOMC) meeting this afternoon with the markets widely pricing in a 50-basis-point interest rate hike, which would equate to the central bank’s most aggressive move higher since the dotcom bubble days of 2000.

As Deutsche Bank’s Jim Reid said in a morning note to investors, “We enter a new era that won’t be familiar to many.”

The once-in-a-generation move though could very likely be the first of many. In fact, the big question hanging over today’s press conference with Federal Reserve Chairman Jerome Powell will be: Could the Fed go even higher to fight inflation that’s running at a 40-year high? Recent comments by Powell and other FOMC members suggest a period of historically hawkish Fed policy lasting well into next year.

“We will be looking for clues as to what Fed Chair Powell recently meant by ‘moving expeditiously to a more neutral policy stance’ in terms of the speed of rate hikes—how many more 50-basis-point hikes, or even three-quarter-point hikes,” said Andrzej Skiba at RBC Global Asset Management.

Others think that unless Powell definitively shuts down any and all speculation of a 75-basis-point hike in today’s press conference, the markets will price in such a move for June.

Another dark cloud for investors: The Fed is expected to give an update on its “quantitative tightening” plans, or the process of reducing its mammoth balance sheet. It’s a further sign that the central bank’s days of easy-money policy—a tailwind for risk assets in the past—are history.

Worst on record

Already, fears of a hawkish Fed are weighing on markets. Long-dated Treasury yields have spiked to their highest level since 2018, and tech stocks are off to their worst start ever to a year. Despite the broad-based selloff in equities, which put the Nasdaq in a bear market and the S&P 500 into correction territory, few on Wall Street are calling a floor.

BofA Securities’ closely watched “sell side indicator,” a measure for investors’ appetite for risk assets, is just one indicator that shows further tough times ahead. The indicator has fallen each month this year, and still has room to fall, says Savita Subramanian, head of U.S. equity and quantitative strategy at the investment bank, suggesting the risk-off mood hanging over markets will persist.

What’s different about the latest markets slump is that it’s driven by retail investors, a cohort that had been a real force in the bull rally of 2020–21. Individual investors, she says, are exhibiting “peak bearishness.“

A look at futures

Ahead of today’s 2 p.m. ET Fed policy decision, U.S. futures are trading modestly higher in the premarket as the yield on the 10-year Treasury dipped below 3%. Meanwhile, stocks in Europe are slightly lower, and Asia was mixed, in unsurprisingly lighter volume ahead of a big Fed decision.

The biggest gainer so far on Wednesday is in the crypto space. At 5 a.m. ET, Bitcoin was up nearly 3%, recovering most of yesterday’s losses.