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Fed's Past


A few numbers to chew on!


All eyes turn to the FOMC as we await Wednesday's decision on interest rates. Since this meeting will likely mark the first rise in the Fed Funds rate in more than four years, it's worth looking at some historicals for recent FOMC meetings and (more importantly) rising rate environments. If you're a numbers Minyan, you'll find plenty in this post. For those that aren't, I've summarized the results below:

  1. Since the March 2003 low, the SP futures have not opened lower on the day of an FOMC decision.
  2. The SPX has done well when the FOMC meeting falls on the last day of the month.
  3. The SPX performed better in the five day period after a rate rise when the Fed Funds rate rises for the first time in five months than during a period of more frequent rate rises.

1. So, let's take a closer look! First, investors have shown confidence in the Fed since the March 2003 low. The SP futures have not opened lower on the day of an FOMC decision during that time.

2. The SPX closed higher 80% of the time when the FOMC decision was released on the last day of the month.

3. Those are great stats but many of you are probably wondering what happens when rates rise? I approached this question two ways. First, I looked at SPX performance when Fed Funds rate rose for the first time in at least 5 months. As the table below shows, the SPX had the highest percentage of positive results on the day after and then five days later. However, I want to make one note of caution. The Fed didn't always target the Fed Funds rate for monetary policy. Prior to the early 1990's, the Fed's emphasis was primarily on the money supply. With that in mind, there are essentially just three occurrences in the past where rates rose for the first time in more than five months and the Fed's primary tool for change was the Fed Funds rate ('94, '97, and '99).

Finally, the table below provides an even more detailed analysis surrounding any rate rise on the date of an FOMC meeting. For the reasons noted above, I've limited the sample to 1994 and forward.

Please remember that past performance does not indicate future results. These facts are provided for your own interpretation.

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