How Stocks Perform After Fed Rate Decisions

How Stocks Perform After Fed Rate Decisions

Rocky White

Thu, September 10, 2026 at 3:00 PM GMT+3 4 min read

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The Fed meets next week and there's more uncertainty than usual heading into the interest rate decision. Betting odds put the chance of a rate hike at a little over 60%. I gathered return data on the S&P 500 Index (SPX) on meeting days and the days that followed, going back to 2015. The table below summarizes the results.

The SPX has averaged about the same return on Fed meeting days compared with a typical day. However, Fed meeting days have been positive less often but have shown more upside when stocks rise compared with typical days. In the week after Fed days, the SPX has underperformed. The index barely broke even on average, with just half of the returns positive. Typically, the SPX averages a return of 0.25%, with 61% of returns positive. For the time frames beyond one week, the returns following Fed days are close to normal.

In the rest of the article, I'll break down the returns in this first table to align with the current market environment. Hopefully, this gives us some insight into what to expect from the stock market next Wednesday and in the weeks and months that follow.

Raised, Maintained, or Lowered

The uncertainty surrounding the Fed's decision leads to uncertainty in the market. There has been a big difference in how stocks performed after the Fed raised rates compared with when it kept rates the same.

From the tables below, in the week following a meeting in which rates were raised, the SPX declined 0.54% on average, with 40% of the returns positive. When rates were kept steady, the index averaged a gain of 0.23%, with 54% of the returns positive. Stocks started moving higher after that first week, but the underperformance was still present three months later.

The day of the meeting is also interesting. The SPX was positive on just 35% of Fed days in which rates were raised, compared with 49% of days when rates were kept the same. However, when the SPX rose on rate-hike days, it averaged an impressive 1.8% gain, leading to an overall average return of 0.10%, the same as when rates were maintained.

There was also underperformance after rates were cut, but that's not a consideration for next week.

Investor Sentiment

Here's some good news. The American Association of Individual Investors (AAII) poll is showing pessimism among its members. Each week, the AAII surveys its members online about where they think the stock market is heading in the next six months. Over the past four weeks, the poll has averaged more bears than bulls. On Fed days and in the weeks following, the AAII poll has been a good contrarian indicator.

When the four-week average of the poll had more bears than bulls, the SPX averaged a return of 0.14%, even though less than half of the days (45%) were positive. The up days featured relatively large moves, which boosted the average daily return.

Stocks went on to perform well after Fed days when the AAII poll was showing pessimism. In the week after the meetings, the SPX averaged a 0.22% return, with 53% of returns positive. When there were more bulls than bears in the four weeks heading into the meeting, the SPX averaged a loss of 0.13% over the following week, with less than half of the returns positive.

Outperformance in these cases lasted a few months.

Putting It Together

Finally, the tables below show the performance of the SPX when the AAII poll showed pessimism in the four weeks leading up to a Fed meeting. The first table summarizes performance after rate hikes (about a 65% chance, according to the odds), while the second shows performance when rates were held steady.

You get a better Fed day in these situations after a rate hike, with an average return of 0.21% versus 0.12% when rates were held steady. However, both figures beat a typical daily return.

It's the next week's return where we see that holding rates steady has been much more favorable than a rate hike. In the 12 instances in which there was a bearish AAII setup and a rate hike, the SPX lost 0.56% over the next week, with 42% of the returns positive. When rates were held, the index gained 0.67% on average, with 58% of returns positive.

Stocks bounced back, however, after the first week following a rate hike. The two-week returns show an average gain of around 0.75% in both scenarios, outperforming typical two-week returns. After that point, holding rates steady became the better outcome.

Implications

Based on the analysis above, the stock market has generally struggled in the week after a Fed meeting, especially after a rate hike. However, when you consider trader pessimism (based on the four-week average of the AAII poll), the following week still struggles, but stocks bounce back much faster compared with rate hikes overall.

The stock market has performed better after Fed meetings when rates were held steady. Additionally, since the expectation is for a rate hike, holding rates steady could provide a significant short-term boost to the market.