The biggest macro disagreement on Wall Street right now isn't about inflation or economic growth. It's about the direction of interest rates — and the two sides are so far apart they might as well be talking about different planets.

A new survey from the Securities Industry and Financial Markets Association (SIFMA) rounds up chief economists from Bank of America, Goldman Sachs, JPMorgan, Morgan Stanley, Deutsche Bank, Citigroup, and more than two dozen other major institutions. Their consensus? The Federal Reserve, now under Chairman Kevin Warsh, will cut rates one to two times in 2027.

The market is pricing almost the exact opposite.

According to CME FedWatch futures, investors assign a nearly 98% probability that the federal funds rate will land at 4.00%-4.25% by June 2027. That implies roughly two rate hikes from today's target range of 3.50%-3.75%.

That's not a small forecasting error. It's a completely different monetary policy path.

Two Worlds, One Fed

The divergence becomes even more striking because both camps broadly agree on inflation. According to the SIFMA survey, 89% of respondents believe inflation expectations remain anchored, even though core PCE is expected to stay at 3.2% by the end of 2026 before easing to 2.5% in 2027 — still above the Fed's 2% target.

Despite that, the survey concludes that "the majority" of economists expect one to two rate cuts during 2027.

Fed funds futures tell another story. Markets see virtually no chance that rates fall below today's level over the next year. Instead, probabilities increasingly shift toward a higher policy rate beginning late in 2026, with two hikes becoming the dominant outcome by the middle of 2027.

The Surprises for Markets

The survey contains another result that may matter even more for investors. Nearly two-thirds of respondents said a Fed rate hike that "ends the equity market rally and causes long-end borrowing rates to spike poses a higher risk than no Fed hike leading to accelerating inflation."

That suggests many of Wall Street's leading economists see the biggest tail risk as the Fed being forced back into tightening — an outcome that could simultaneously pressure equity valuations and drive long-term Treasury yields higher.

The survey also highlights what could push the economy in either direction. Respondents identified AI-related capital spending, lower energy prices, and stronger consumer spending as the main upside risks to growth. On the downside, they pointed to an AI investment slowdown, escalating geopolitical tensions, and another rise in energy prices as the biggest threats.

Why Investors Should Care

The current disconnect leaves investors facing two very different scenarios. If the economists are right, modest Fed rate cuts in 2027 would gradually ease financial conditions, supporting equity valuations and providing another tailwind for the broader U.S. stock market, as tracked by the SPDR S&P 500 ETF Trust (SPY).

If Fed futures markets prove correct instead, the Fed could still be fighting inflation next year, forcing another round of tightening just as many economists expect policy to become more accommodative. Such a scenario could become a significant headwind for equities and other risk assets.

One of these views will eventually prove wrong. If markets are forced to reprice the Fed's path, the adjustment is unlikely to be painless. Until that disconnect closes, monetary policy may remain one of the most overlooked risks for investors heading into the end of the year.