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Can You Spot a Pattern in the Market’s Reaction to Fed Meetings?

By:

Chief Strategist at Interactive Brokers

Short Answer: Sort of.  But not really.

Longer Answer: I made intraday graphs of the NASDAQ 100 (NDX) and S&P 500 (SPX) indices for the 3 day period surrounding each of this year’s prior Federal Reserve meetings, hoping to find a tradeable pattern.  (I only examined scheduled meetings, not the emergency meeting that occurred during the depths of the Covid crisis)  Did indices rise or fall during or after the Chairman’s press conference?  Did overnight futures signal a subsequent move one way or another?

In each of the graphs below, the yellow line is NDX and the green is SPX.  The only pattern that seems apparent is that SPX closed lower after each of the last 3 meetings.  That is not the case for NDX, reflecting the stellar outperformance of that index over its broader peers

Also, I have long used the adage “The first move is the wrong move” when it came to the market’s reaction to the initial announcement.  That is true to some extent, since there is always some sort of trading reversal after the press release, but finding that turning point is more art than science.  It does not appear to occur at any specific time frame after 2:00 Eastern.

And finally, there are too few data points from which to draw any sort of significant conclusion. 

I would love to offer some sort of foolproof trading advice around a Fed meeting, but I simply can’t. 

Source for all graphs: Bloomberg

Disclosure: Interactive Brokers

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