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Sounding off on a 'dovish hike'

There are at least 53 separate mentions in my inbox of the term "dovish hike."

That's not counting all those emails with attachments or graphics that have to be deleted pretty much upon arrival to keep the inbox below its allowed size. Nor does it include emails with phrases similar but not exact to what I searched for, such as "dovish Fed hike," "dovish rate hike," or Jeremy Siegel's "wrapped in dovish packaging."

In fact, considering the efficacy of Outlook's search function, I'm not even sure it encompasses every email I have with exactly the phrase "dovish hike." Not to mention the inbox only contains a few weeks' worth of emails for the aforementioned size reasons at any given time.


Point being: everyone and their shoe-shiner seems to expect a "dovish hike" from the Federal Reserve on Wednesday.

Read More Are they wrong? Fed set to hike at a rough time

There is, for starters, almost unprecedented consensus that the rate hike itself will happen. (Recall that as late as the 1990s, it was up to markets to discern whether the Fed had moved rates at all after each of its meetings.)

"Throughout 2015, economists have never been so convinced of the imminence of an interest rate increase," The Wall Street Journal reported last week. "About 97 percent of those surveyed in recent days said the Fed will raise its benchmark interest rate next Wednesday."

The Journal also previously reported that short bets against the five-year Treasury note were at their highest on record going back to 1993.

Meanwhile, the "dovish" part of the hike is that the Fed is expected to signal, even as it raises rates, an almost glacially slow pace and size of future rate increases.

Recent rate-hike cycles, particularly the last one from 2004-06, had a stair-step look in which the Fed lifted the benchmark rate by a quarter-percentage point at its meetings pretty much every six weeks.

The current view is that this rate-hike staircase, if it's to form at all, will be much lower and flatter. Jan Hatzius of Goldman Sachs expects one rate hike about every three months next year. Ellen Zentner of Morgan Stanley thinks the Fed, if not "one and done," will be closer to "one and 'we'll let you know'" in terms of additional rate hikes.

Read More Expect at least two Fed rate hikes in 2016: CFO survey

The Fed could signal this in a number of ways on Wednesday. The "dots" of each Fed member's projections for 2016 and beyond, also released to the public, could demonstrate they largely expect very low rates for a very long period. Or, the central bank could indicate that in the statement itself. Or, Fed Chair Janet Yellen could spell it out in her news conference.

The risks should the Fed either not raise, or not express a "dovish hike," on Wednesday are obvious. Crowded trades blow up all the time, as Wall Street watchers well know (and sometimes relish). This time, the entire financial system seems to be on one side of the boat.

That said, a perfectly executed "dovish hike" has its own risks, too.

It may, by the very lack of a market panic, reinforce existing "safe" trades that crowd out smarter or more difficult but ultimately sounder ones.

Read MoreFed-phobiacs: Relax, everything's going to be OK

It may mask much deeper disagreement by the Fed and the broader public about the health and direction of the economy and financial markets.

It may even be nonsensical.

If the economy isn't really strong enough to warrant rate hikes, then why do one at all, except as a symbolic "off of zero" gesture? If it is, and steady job gains morph into stronger-growing wages, then the rate hike "stair step" will probably turn out to be fairly traditional.

"This isn't the same as one-and-done, but rather one-and-wait-and-see-more-data," said Michael Feroli of JPMorgan.

What all the "dovish hike" discussion seems to really mean then is nothing new, but rather more of the Fed's same old, wrapped in new packaging: it depends.