By John Stewart
Chief Investment Officer at Farmers Trust Co.

Week in Review: Fed Hikes as Expected

By the time of the Fed meeting this past week, the market-implied odds of a quarter-point hike in the Fed Funds rate was all but guaranteed at around 92%.

There was no shortage of opinions as to what the Fed SHOULD have done – some market watchers wanted no change, and others wanted a bigger half-percentage point hike.

When all was said and done, however, the market had it right, as it usually does – stocks initially sold off about 1% after the Fed announcement, but less than 24 hours later the S&P had climbed back above the level it had been trading at prior to the announcement.

After peaking above 5%, the 10-year Treasury rate fell back to around 4.95%; so the Fed may have succeeded in lowering long-term rates that drive mortgages by raising short-term rates.

If, and it’s a pretty big IF, the price of oil is able to move lower in the coming weeks, it is possible the Fed’s work may be done for the balance of this year.

Many investors get nervous when the markets become more volatile; there’s been an uptick in pessimism recently despite a rather modest rise in volatility over the past few weeks.

The American Association of Individual Investors survey shows only 28% of investors are bullish for the next six months, compared with 53% that are bearish – the balance is neutral.

Market volatility can create opportunity for investors who have been sitting on the sidelines to buy at lower prices, provided they keep a longer-term perspective.

You can also use the options market to earn premiums in exchange for being willing to buy into the market at lower prices; the more volatility, the bigger the premium payments you receive.

Looking Ahead: Third Quarter Comes to a Close

The end of the third quarter is fast approaching, and investors will likely be repositioning portfolios for the final stretch of the year into the fourth quarter.

The fourth quarter tends to be one of the best quarters of the year for the stock market, especially when returns have been positive for the first three quarters, as they have been thus far in 2026.

Money managers that have been underweight stocks typically feel the need to play catchup toward the end of the year if they are underperforming, which helps to drive markets higher into year-end.

Corporate earnings have been incredibly strong this year, and we’ll start to get another round of earnings reports beginning in the second week of October.

Barring any unforeseen change in the macro environment, this market seems well-positioned to continue to grind higher.