Decision days at the Federal Reserve haven’t been kind to stocks over the last year.
Here’s a breakdown of how major assets have performed.
The table below, included in a Wednesday note written by Deutsche Bank strategist Alan Ruskin, breaks down the performance of the S&P 500 and 2- and 10-year Treasury yields on Fed decision days over the past year.
Deutsche Bank
They’ve tended to be negative for stocks, with the S&P 500 index
SPX,
seeing a median fall of 1.2%, though the range has been wide. The July 2022 rate hike was followed by a rally of more than 2.6%, while declines of around 2.5% were seen in November and December. The mildest reaction came last month, with the S&P 500 losing less than 0.1% as the Fed stood pat on rates for the first time since beginning its hiking cycle in March 2022.
That goes hand in hand with data compiled by Bespoke Investment Group that shows Fed decision days under Jerome Powell have tended to see stocks swoon following the policy release and the chair’s news conference.
In One Chart: It’s the ‘late-day selloff’ in stocks that characterizes Fed days under Powell
The Fed is seen as virtually certain to lift the fed-funds rate by 25 basis points, or a quarter of a percentage point, when it announces the policy decision at 2 p.m. Eastern. Powell will field questions from reporters at 2:30 p.m.
Read: Everyone thinks the Fed’s rate hike this week will be the final one — except the Fed
Stocks have extended a 2023 rally since the Fed refrained from raising interest rates again in June. Fed officials had signaled at the time that they expected to lift rates by at least another 50 basis points before being able to declare victory against inflation. Investors by and large are skeptical the Fed will further hike rates after Wednesday’s expected move. They’ll be closely attuned to language in the policy statement, and Powell’s words.
Stocks were in a holding pattern Wednesday ahead of the decision, with the S&P 500 off 0.2%, while the Dow Jones Industrial Average
DJIA,
edged up 0.1% in a bid to extend its longest winning streak since February 2017 to 13 sessions. The Nasdaq Composite
COMP,
fell 0.5%.
See: Why the stock market’s initial reaction to Fed decision may rest on this crucial sentence
The table below breaks down Fed Day performances for the dollar versus the euro
EURUSD,
the Japanese yen
USDJPY,
and its Australian counterpart
AUDUSD,
:
Deutsche Bank
Need to Know: Inflation is heading to zero, according to the one factor Jerome Powell absolutely will not discuss
This post was originally published on Market Watch
