ispyetf logo
Login | Free Newsletter Subscribe
Post FOMC Meeting Effect Tends to Kill S&P 500 Mojo
By, Simon Maierhofer
Thursday October 31, 2013
The Federal Reserve announced that the 'big bad taper' will stay in the closet. That’s good news. The Fed announced the same thing on September 18, which led to a three-week correction. The same thing happened in late July.

You know the spiel. When there’s a Federal Reserve meeting on Wednesday, the stock market (NYSEArca: VTI) takes a hiatus until Mr. Bernanke makes his announcement.

There’s a Federal Open Market Committee (FOMC) meeting about every 45 days or eight times a year.

More often than not the S&P 500 (SNP: GSPC) has a positive bias going into the FOMC meeting, but the S&P 500 has lost its mojo after each of the last three FOMC meetings.

The S&P 500 chart below illustrates the S&P’s performance after the last 10 FOMC meetings.

This chart covers an incredibly bullish time period, but it’s interesting to note that – since September 2012 - the S&P 500 dropped below the FOMC meeting high every single time within the next few weeks.

More remarkable than the S&P’s post FOMC performance history is the S&P’s pre FOMC performance history.

An official Federal Reserve study shows that the ‘pre FOMC drift’ (optimism leading up to the FOMC announcement) accounts for all S&P 500 gains over the last two decades.

In other words, pre FOMC gains inflated the S&P 500 to an unbelievable degree. A full analysis (with shocking charts) of the Federal Reserve study is available here:

New York Fed Research Reveals That FOMC Drove S&P XX% Above Fair Value

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE Newsletter.

footer top
footer bottom