AI Optimism Overrides a More Hawkish Fed as Nasdaq Hits Record, Bitcoin Breaks Out

TL;DR: Nasdaq hit a fresh record and Bitcoin broke above $84,000 just days after the Fed hiked and raised its projected rate path, as AI investment conviction and a separate regulatory catalyst overpowered the higher-rate headwind—though breadth remains narrow, with only about 30% of S&P 500 stocks above their 50-day averages.

Markets Look Past a More Hawkish Fed

Risk appetite strengthened sharply at the start of the week despite a Federal Reserve that has become more hawkish, not less. The Nasdaq Composite surged 2.26% on Monday to a fresh record close of 27,122.09, while Bitcoin broke above $84,000 to its highest level in eight months. The moves came only days after the Fed raised its policy rate by 25bp to 3.75–4.00% and lifted the median 2026 year-end rate projection from 3.8% in June to 4.1%, implying another hike before year-end.

This is therefore not a conventional risk rally driven by monetary-policy relief. Investors are instead choosing to look through a higher projected Fed path as conviction around AI investment and technology earnings remains strong, while Bitcoin is benefiting from a separate regulatory catalyst. Falling oil and softer Treasury yields have made that easier by reducing some of the immediate inflation and financial-conditions pressure, but they don’t change the basic contradiction: the Fed has tightened, yet some of the market’s highest-beta assets have become stronger.