Costs to Hedge the $16 Trillion S&P 500 Rally Rise Ahead of Fed

Friday’s belated inflation reading cemented Wall Street bets that the Federal Reserve will cut rates at this week’s policy meeting. That doesn’t mean equity investors are sounding the all-clear.

A derivatives market measure of costs of bearish versus bullish bets has steepened as the S&P 500 Index trades near all-time highs. Investors who watched the index add $16 trillion in market value in the face of a series of dire warnings in the past six months have grown uneasy with President Donald Trump’s unpredictable trade-war threats, even as negotiators line up diplomatic wins for him and China’s Xi Jinping to unveil during meetings in Asia this week.