Five Possible Outcomes from the FOMC

Here are 5 possible outcomes for Wednesday's 2pm FOMC Statement and how the stock and Treasury market might react to them.  

Fed Action                                                                    Market Reaction
1.  No Hike, No Change in Forward Guidance             Knee-Jerk Bounce in Stocks, Could be Sold
                                                                                      To Leave Stocks Little Changed on the Day

                                                                                       Treasury Yields Little Changed, Curve
                                                                                       Could Steepen

2.  No Hike, Keeps April or June Hike in Play,             Knee-Jerk Bounce in Stocks, Sold To Leave
     No Change in Forward Guidance                             Stocks Lower on the Day
     (WSJ scenario)
                                                                                       Treasury Yields Little Changed, Curve
                                                                                       Could Flatten

3.  No Hike, Lowers Forward Guidance                        Stocks Rally

                                                                                       Treasuries Rally


4.  25 BP Hike, Lowers Forward Guidance                  Knee-Jerk Sell-Off in Stocks, Could Be
     (my preferred scenario, but long shot)                     Bought To Leave Stocks Higher on the Day

                                                                                       Treasury Yield Impact Not Clear, Could
                                                                                        Be Opposite of Stocks

5.  10-20 BP Hike, Lowers Forward Guidance              Stocks Rally
      (even better scenario, but long shot)                      
                                                                                        Treasury Yield Impact Not Clear, Could
                                                                                        Be Opposite of Stocks