Breaking Down the S&P 500 Index's Fed Week Performances

The SPX was more reactive to Fed days before 2015

Senior Quantitative Analyst
Oct 24, 2017 at 3:54 PM
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Next Wednesday, the Fed will conclude a two-day policy meeting. The Fed isn’t expected to do anything with interest rates, but markets can still move based on what Fed Chair Janet Yellen has to say afterward. Below, I show you how stocks have performed around these closely watched Fed days.

Fed Days & Rest of the Week

Fed days haven’t had much effect on stocks recently. Since 2015, the S&P 500 Index (SPX) averages a 0.11% return on Fed days, which is exactly what a typical Wednesday has averaged (all but one Fed day was on a Wednesday). The rest of the week, however, has struggled after Fed days. The index has been positive less than half the time, averaging a small loss Thursday through Friday after Fed day.

S&P 500 Index Fed week

Before 2015, Fed days seemed to have more meaning for stocks. The tables below showed Fed days having an impressive performance as measured by average return. Fed days averaged a gain of 0.28% versus a typical Wednesday gain of 0.03%. The standard deviation on Fed days was significantly higher than usual (0.96% versus 0.75%). While the market seemed to move significantly on Fed days, the rest of the week matched the typical market returns.

spx fed weeks

In the table below, I break down S&P 500 returns by the two days before and after Fed days. If this is a guide, then expect stocks to struggle on Monday, where the S&P 500 has been positive barely 30% of the time since 2015 during Fed weeks. Tuesdays, however, have tended to be bounce-back days, with the index averaging a gain of 0.18% and positive over 60% of the time.

SPX fed weeks

 

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