the june meeting of the federal reserve comes as investors are trying to balance worries about an economic slowdown with the fact that stocks have rallied sharply this year and appear to be gaining more steam the central bank is widely expected to keep rates steady on wednesday it will mark the first meeting at which the fed has not raised its benchmark rate since starting its latest hiking cycle in march 2022 however many wall street pros are expecting a hawkish pause in which the fed makes clear that it is more than willing to hike again in the coming months they have the potential to change their projections potentially increasing the median forecast in their dot plot to signal that there could be more rate increases which could be a hawkish signal … the other area that markets will be looking at very closely is the inflation forecast said michelle cluver portfolio strategist at global x a more clean fed pause could be an event that investors cheer pushing equities up and bond yields down but the mixed messages and the recent rally for stocks could make for a rocky trading session risk is very overbought near term on the one hand were vulnerable to negative news wednesday or perceived negative said andrew slimmon us equity portfolio manager at morgan stanley investment management its just hard to see the market selling off substantially when so many investors are looking for an opportunity to get back involved slimmon said that the market is currently in a progression from fear to fear of missing out that should see the rally broaden out beyond tech stocks as the year progresses and investors rotate out of money market funds the potential for shortterm volatility and a longterm rally would seem to benefit funds like the invesco s  p 500 equal weight etf rsp and the ishares russell 2000 etf iwm  which have seen a recent uptick in inflows and are outperforming the nasdaq 100 in june iwm 1m mountain small cap stocks have rallied in june but for investors worried that more fed rate hikes in the coming months could tip the economy into recession fixed income might be a more attractive bet jared woodard investment and etf strategist at bank of america in a note to clients on monday night that municipal bonds look relatively attractive among fixed income assets municipal bond issuers appear well poised to weather a possible recession in 202324 state and local government rainy day funds are at record highs of 120bn ratios of revenue relative to debt are also strong at 107 the highest since 2003 woodard wrote bank of america has the equivalent of a buy rating on several municipal bond etfs including jpmorgan ultrashort municipal income etf jmst and the ishares national muni bond etf mub  and with fixed income its not just the type of bond that matters but also the timing cluver said that her team shifted its fixed income exposure to focus more on the earlyintermediate duration area of the yield curve shortterm bond funds were extremely popular last year as they were able to capture the additional yield from fed rate hikes but funds focused on slightly longerterm bonds would allow investors to lock in yields now ahead of potential rate cuts down the line the intermediate duration portion typically does well as we reach the end of the feds rate hiking cycle it is typically in the last six months we start seeing that area of the curve hold up better than the rest cluver said some large funds that could fit that description include the ishares 37 year treasury bond etf iei  the schwab intermediateterm us treasury etf schr and the vanguard intermediateterm corporate bond etf vcit that is also the part of the curve targeted by a new etf from rick rieder blackrock chief investment officer of global fixed income the actively managed flexible income etf binc launched in may and has about 76 million in assets so far according to factset