Today, the FOMC will meet for the first time this year and based upon CME Group’s FedWatch Tool there is just a 5.2% chance they will raise interest rates when the meeting ends tomorrow. Instead the next hike will likely be in March when Jerome Powell will be the new Fed Chair.
In the above chart the 30 trading days before and after the last 79 Fed meetings (back to March 2008) are graphed. There are three lines, “All”, “Up” and “Down.” Up means the S&P 500 finished announcement day with a gain, down it finished with a loss. Down announcement days have generally been the best buying opportunity while up announcement days were more frequently followed by weakness.
Of the last 79 announcement days, the S&P 500 finished the day positive 47 times. Of these 47 positive days S&P 500 was down 27 times (57.4%) the next day. Of the 32 down announcement days, the following day was down 17 times (53.1%). All 79 announcement days have 0.43% average S&P 500 gains while the day after has been a net loser with S&P 500 declining 0.30% on average.
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