Less than a week out from the Federal Reserve's most critical policy decision in years, Wall St opinion makers can't agree on anything.
Not only is there no consensus about whether the Fed will end its seven-year-old policy of zero interest rates, but views on the fallout from such a move are wildly disparate.
There are some, like hedge-fund titan Ray Dalio, who say a rate increase will prove an epic blunder in the face of a vulnerable global economy, prompting policymakers to abruptly reverse course and start printing money again.
There are others, such as Citigroup economist William Lee, who say the expansion is healthy enough seven years after the financial crisis to withstand higher rates. This week's increase will be the first of several over the course of the next year, they argue.
Guy Haselmann, a Scotiabank strategist, says in nearly three decades on the Street he's never seen such confusion. Much of that, he notes, is the result of the "mixed messages coming out of the Fed". One day, a Fed member is expounding on the benefits of delaying a hike, and the next, another is calling for action.
But the discord among traders and analysts underscores a more important point: The stakes are high for Fed policymakers right now. Get this wrong, and it could deal a big blow to the economy and their credibility.
The Fed is slated to announce its decision on September 17, at the conclusion of its two-day meeting. As of the close of trading on Thursday, futures traders assigned a 28 per cent chance that the rate will be lifted a quarter-point to a range of 0.25 per cent to 0.5 per cent. Analysts are a bit more sure there'll be a hike, with about half of the 81 surveyed by Bloomberg predicting one.
As divided as the market is on that decision, it's the aftermath that stirs the real split. In the global-economy-is-too-weak camp, Dalio has plenty of company. Names like Krishna Memani, chief investment officer of OppenheimerFunds , and Larry Summers, the former Treasury Secretary and Harvard University president. Memani, like Dalio, says the increase will prove so premature that policymakers will find themselves having to resort to another round of quantitative easing to resuscitate growth.
While the US expansion has been stable, "that's not looking at the full evidence", Memani said. He pointed to the heavy debt burdens of developing economies like China that could weigh down growth.
On the other side, Citigroup's Lee is joined by people like Haselmann and Peter Tchir of Brean Capital.
An increase this week, in their view, is warranted - even necessary.
"Seven years at zero doesn't seem to have fixed everything," Tchir said.
"So let's try something different."
He puts an unusual twist on last month's market volatility: it underscored the need for the Fed to start raising rates, rather than holding off longer. Accommodative monetary policy has supported too much risk-taking by investors, he said.
Somewhere between the two camps is a middle ground made up of people like Alex Roever, head of US rates strategy at JPMorgan Chase. There's a risk that bond traders are underestimating the pace of rate increases, which could complicate the tightening process by jarring the market. Even if that's the case, policymakers may not need to reverse right away, he says.
Roever's team predicts two-year Treasury yields will approach 1.7 per cent in a year, from 0.71 per cent on Friday. Bloomberg