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.
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