The Federal Reserve will make its final interest rate decision of 2023 on Wednesday. The Fed funds futures shows markets are pricing in a nearly 100% chance the Fed will hold rates steady at a target range of between 5.25% and 5.5%.

As investors look ahead to Federal Reserve Chair Jerome Powell's testimony following the decision, Azoria Partners CEO and CIO James Fishback tells Yahoo Finance he doesn't expect Powell to "validate any of the dovishness that the market is currently professing."

“It will be a hawkish meeting tomorrow," Fishback added.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

SEANA SMITH: We got that CPI print out this morning. There was a focus on that just in terms of maybe what that's going to tell us about what the Fed policy could look like going into 2024. What is your outlook as we look ahead to '24 and whether or not we're going to see that soft landing?

JAMES FISHBACK: It's a great question, Seana. I think a lot of people are divided into the soft landing and the hard landing camp, but there's actually a third option here-- and it's no landing. And so what happens if six months from now, the labor market hangs in there, and we saw the confirmation of that last Friday, and inflation that progress starts to stall out, what does that mean for the Fed?

I don't think they're going to be going as much as the market price is today, which is over 100 basis points of rate cuts through the end of the year of next year. That risks fueling actually more economic activity, and potentially inflation, which is the exact opposite of what Chair Powell wants right now.

BRAD SMITH: Yeah. And so ultimately, I mean, as you continue to think about what the Fed's tenor, how it may shift, when that may shift, what are your expectations there?

JAMES FISHBACK: I think tomorrow's meeting is going to be a big one. And the reason why is because coming into this meeting, the Fed was saying we're going to only cut once next year via the dot plot. And look at what the market's pricing, they're going to cut four times. So that has to resolve itself.

I don't see Powell actually validating any of that dovishness that the market is currently professing. And so what we'll expect to see is not a hawkish meeting in absolute terms, but relative to what market consensus is at the moment and the rates market, it will be a hawkish meeting tomorrow.

SEANA SMITH: So what do you think that's going to do then for volatility and looking beyond tomorrow and beyond the next couple of trading days out into 2024 if the market's being a bit too aggressive in pricing of the rate cuts?

JAMES FISHBACK: That's the million-dollar question, right? My former boss David Einhorn of Greenlight Capital had an old saying that good things happen to cheap stocks, the corollary is bad things happen to expensive stocks. And so it's not a coincidence that the rally we've seen in November was happening at the same time as this massive fall in 10-year yields as the market started really embracing the idea of imminent rate cuts. As that starts to unwind, what happens to stocks in the first quarter? That's going to be a really important thing to watch.