Tomorrow is yet another Fed Day, and it’s expected to be a big one given the belief that some form of QE will be announced.
Since the Fed began its Zero Interest Rate Policy (ZIRP) back in December 2008, the market has done well on Fed Days, with the S&P 500 averaging a gain of 0.74% on the day with positive returns 71.4% of the time. The bulk of the gains have come before the Fed’s announcement (typically at 2:15 PM ET but also at 12:30 PM ET more recently), with the index averaging a gain of 0.53% from the prior day’s close through the time of the announcement. The S&P has also averaged a gain of 0.21% from the time of the announcement through the close on the day, but the index has declined over this time period more often than it has gone higher. Four out of the last five Fed Days have been very strong days, and all three Fed Days this year have seen the S&P close higher by at least 0.87%.
The market is up 5.60% over the last two weeks leading up to tomorrow’s Fed announcement. This has caused many to believe that anything the Fed does has already been priced in. But is it really? We went back and looked at market performance in the two weeks leading up to all prior Fed Days to see how this has impacted performance on the actual Fed Day.