Friday’s quadruple witching is known to bring volatility to markets, and that could be exacerbated this time around given the digestion period after Wednesday’s Federal Reserve rate hike and with the seasonal volatility that typically arises during the month of September.
While the Federal Reserve is expecting another rate hike in 2026, we remind investors that these telegraphs are not certain and are subject to change. If we were to see a reprieve in oil prices, that could throw cold water on another hike and make September’s one and done. Oil prices are high because of geopolitical issues, not due to any kind of secular and structural reason.
The stock market has held up very well so far in September, with the markets down marginally so far during the month. Markets remain on eggshells thanks to rising oil prices and bond yields and we are not out of the woods when it comes to the volatility that typically arises during September and October.
The playbook for a volatile fall stock market is simple, and that is to add exposure to areas of the market that have contracted for no significant fundamental reason, other than emotions and sentiment.
The next potential catalyst for markets is the September 30 PCE reading, which has taken on extra importance now that the Fed just raised interest rates and made it clear that they’re squarely focused on the inflation side of their dual mandate.
