The Best Stocks and Sectors for Fed Week

Silver and gold exchange-traded funds tend to outperform during the week of Fed meetings

Sep 19, 2017 at 2:23 PM
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The Fed is expected to emerge from its two-day policy meeting tomorrow without announcing a rate hike, with most traders expecting the central bank to lift rates again in December. However, some are expecting Janet Yellen & Co to detail plans on how the Federal Reserve will unwind its massive balance sheet. With Fed Fever in the air, we decided to take another look at the historically best and worst stocks and sectors to own during Fed meeting weeks.

Best ETFs for Fed Week

Below is a list of 34 exchange-traded funds (ETFs), based on how they've performed during Fed weeks, going back to 2015. Two funds caught my attention: the iShares Silver Trust (SLV) and the VanEck Vectors Gold Miners ETF (GDX). The SLV boasts the best win rate, ending the week higher about three-quarters of the time, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. Further, SLV averages a healthy return of 1.09% during these weeks. GDX, meanwhile, sports the highest average return, gaining 2.23% and ending in the black 67% of the time.

ETFs Fed week

SLV, GDX On the Charts

Since touching an annual low of $14.44 on July 10 -- the latest in its channel of lower lows since March -- SLV shares rallied to as high as $17.10 on Sept. 7, as geopolitical tensions sparked demand for tangible, "safe haven" assets like silver. The $17-$17.50 area is a familar speed bump for SLV, though, as it's contained all of the ETF's rally attempts in 2017. This area is also home to a 38.2% Fibonacci retracement of SLV's rally from late 2015 to its August 2016 peak. Amid the recent stock market rally -- and coincident appetite for riskier assets -- SLV is now trading around $16.28.

SLV chart


GDX has followed a similar pattern on the charts. The fund enjoyed a quick rally off its early July lows in the $21-$22 neighborhood -- a level that's provided support in 2017, and that represents a 23.6% Fibonacci retracement of GDX's 2016 high to its 2016 low -- but the shares ultimately stalled in the $25-$26 area, which has acted as a ceiling for nearly a year. This area also represents a 50% Fibonacci retracement of GDX's decline from its 2016 peak to its low. At last check, GDX is trading around $23.72.

GDX chart

Large Speculators Eye More Upside for Silver, Gold

Whether SLV and GDX will once again outperform this week has yet to be determined. However, large speculators seem to be expecting more upside for silver and gold, at least, going by the latest Commitment of Trader (CoT) stats. Long positions on silver increased for an eighth straight week last week, to the highest point since late April, according to Schaeffer's Quantitative Analyst Chris Prybal. This, after net long positions on silver were at a two-year low in mid-July.

Meanwhile, these speculators added to their long gold positions for a ninth straight week, bringing the net long position to its highest point since late September 2016, before the presidential election.

Best and Worst Stocks for Fed Week

Below are the 25 best and 25 worst stocks to own during the week of Fed meetings, per White's data going back to 2015. Utilities stocks -- both gas and electric -- continue to dominate the list of best stocks, with several real estate stocks also sprinkled in. The list of worst S&P 500 Index (SPX) stocks to own varies quite a bit more. Qualcomm and DISH Network are tied for the worst win rate, at 24%, while Apple supplier Qorvo has racked up the steepest average loss of 2.21%. Also on the list is toymaker Mattel stock, which started the week on a rough note. 

best stocks fed week

worst stocks fed week

 

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