Fed Maintains Rates Unchanged; Real Risk to Bull Market Is AI Bubble, Says Wall Street

According to SoFi Chief Market Strategist Liz Thomas and other Wall Street analysts, the Federal Reserve kept interest rates unchanged at 3.5%-3.75% during its June meeting, while signaling room for rate hikes within the year. The 2-year U.S. Treasury yield climbed to 4.177%, the highest since February 2025, reflecting investor concerns about inflation persisting above 4%. However, the Fed's new approach under Chair Kevin Warsh aims to let markets, rather than central bank guidance, drive economic expectations.

Historically, past rate-hike cycles have not necessarily triggered stock market crashes; the S&P 500 rose in 4 of the last 5 tightening periods since the early 1990s. Yet Société Générale strategist Albert Edwards and Thomas warn that the current bull market is deeply dependent on the AI investment boom sustaining high asset prices. If the AI rally falters, both consumer spending and corporate investment—currently fueled by wealth gains—could face severe headwinds, posing the real market risk.