The recent recovery rally in equities has made them pricey once again, leaving little room for error when the Federal Reserve provides a monetary policy update.

Within a few weeks, investors went from slashing exposure to risky assets to chasing the sudden sharp rebound — one of the strongest in 75 years. Buoyed by resilient earnings and expectation that trade deals could be around the corner, stocks are back to being expensive, especially in the US.

The Fed is widely expected to hold its rate policy steady on Wednesday. Options markets expect a one-day move of 1.1% for the S&P 500 Index after the meeting, according to data from Goldman Sachs Group Inc. Investors will closely be watching Chair Jerome Powell’s remarks, especially on the impact of tariffs on the economy, to gauge the path of the central bank’s decisions from here.

“Hawkish surprises could lead to a temporary decline in cyclical assets,” said Florian Ielpo, head of macro research at Lombard Odier. “A dovish surprise looks extremely unlikely,” he added, pointing to signs of inflationary pressure from recent US data. Ielpo also said a key point to monitor will be the use of Fed’s balance sheet to stabilize the bond market.

Quantitative easing has been a powerful tool in the past to stabilize both bond and equity markets during periods of uncertainty and recession. A hint that it could be on the cards could keep the bullish narrative alive, something equities badly need after their powerful bounce. The probability of recession has jumped to 40%, according to data compiled by Bloomberg.

At HSBC Holdings Plc, strategists led by Max Kettner said “forward-looking indications are for hard data to feel the pain soon,” potentially in the next few months. “The Fed is also more likely to display a wait-and-see mode in this week’s FOMC meeting – which might pour cold water on dovish ‘Fed put’ hopes,” they said.

Traders anticipate three Fed cuts by the end of the year, starting in July. That scenario likely requires some deterioration in the job market and economic growth, and a lack of inflation despite US import taxes threatening to raise the cost of goods.

Factors aside from the central bank give some investors hope that stocks have room to rise, at least in the short term.

JPMorgan Chase & Co.’s Market Intelligence desk, led by Andrew Tyler, said a rally toward 6,000 for the S&P 500 Index is more likely than a setback in the near term. They cite a better earnings season than analysts had expected, positive headlines on trade, buybacks and bullish retail investors as positive catalysts.

A run to 6,000 would represent “another near-term peak,” Tyler and his colleagues said. However, they’re more bearish in the medium term. “We are at the beginning of the economic slowdown despite likely having seen peak, negative trade war rhetoric.”