The first Fed rate hike is probably a red herring

Inflation has been below the Fed's target for years and does not seem likely to exceed it in the near future. Simply put, Fed officials believe that the economy no longer requires extraordinary monetary support and also would like to provide some room to cut rates when the next downturn occurs.

What matters more than the month of the first hike is the pace of the hiking cycle. The last five Fed hiking cycles have averaged over 230bp per year, or more than 25bp per meeting. 

But the Fed has emphasized repeatedly that this cycle will be different, and FOMC forecasts currently imply only 4-5 25bp hikes in 2016 and two in 2015. Market participants are even more dovish, pricing in 3-4 25bp hikes in 2016 and one in 2015.

It would be a decidedly different story if and when inflation becomes a problem, because Fed rate hikes would then be aimed at slowing the economy (and earnings) and would continue until that objective was achieved, a process that has often resulted in recession. That scenario would see risk assets re-price down sharply, but that is not a story for this year.