It's what the RBA says, not what it does that matters - and the ASX stocks to watch

That sound you can hear is the sigh of resignation from Australian investors accepting the writing is on the wall for at least one more rate hike. According to the ASX's RBA Rate Tracker, there's a 76% chance of a rate hike when the RBA meets on 29 September.

With the US Fed also likely to raise rates this week, and the ECB doing so a week ago, we're now staring down the barrel of another potential global rate hiking cycle. So if a rate hike is now a foregone conclusion, what's arguably more important is where the central bank goes next. 

This is a rare occasion when words will speak louder than actions. 

As Macquarie put it in a recent client note, "a hike is priced, tone is the risk". 

"The decision itself is mostly expected, so the bigger market question is whether the statement keeps a fifth move alive with a hawkish tone."

What complicates the RBA's decision is that weak growth and demand, and an ongoing housing slump, mean rate hikes could further damage an already fragile economy. 

"All up, the RBA recognises that restriction rates are slowing the economy, but has not indicated this is enough to return inflation sustainably to target."

What investors should do 

One thing to keep in mind is not to be too hasty in how you position before the decision is actually made. According to Macquarie, a bigger shock would be if the RBA decides to hold fire. 

"Our base case is a hawkish hike, but the decision is not the main risk," it wrote. 

"With cash futures pricing a 72% probability of a September move and close to two hikes across the curve, the larger surprise would be guidance indicating that the current level of restriction is sufficient."

For investors, it's a matter of looking before you leap.

"In sum, do not buy the pivot before the RBA sells it. A hawkish hike is unlikely to provide relief to rate-sensitive assets. On a neutral surprise, the first trade is REITs and duration growth. A broader rotation into consumer and housing cyclicals requires falling inflation, a lower expected rate path and evidence that earnings are not deteriorating with demand."

The stocks to watch

Defensives and quality stocks are the ones to favour in the near term, says Macquarie. 

Ahead of the expected hawkish hike from the RBA, it is constructive on Challenger Ltd (ASX: CGF), Computershare Ltd (ASX: CPU), Suncorp (ASX: SUN), APA Group (ASX: APA) and Woolworths (ASX: WOW) as stocks with momentum or upgrades.

The least favoured stocks include National Australia Bank (ASX: NAB) and Westpac (ASX: WBC), Harvey Norman (ASX: HVN), Nine Entertainment (ASX: NEC), Dexus (ASX: DXS), GPT Group (ASX: GPT), Seek (ASX: SEK) and Xero (ASX: XRO).