Zinger Key Points
- Fed meetings in 2024 delivered a median S&P 500 gain of 1.1%, boosting short-term investor optimism.
- Holding stocks for 15 sessions post-Fed meeting doubled returns, averaging 3.3% gains in 2024.
- Get Monthly Picks of Market's Fastest Movers
The U.S. stock market has generally delivered solid gains around Federal Reserve meetings in 2024, signaling investor optimism as the central bank prepares for its final policy decision of the year on Wednesday.
An investor adopting a short-term long strategy — buying the S&P 500 index at market close the day before a Fed meeting and selling at the close the day after — would have realized a median return of 1.1% over the last seven meetings.
According to data compiled by Seasonax, this strategy has yielded positive returns six out of seven times this year.
The best-performing event came during the September FOMC Meeting, when the Federal Reserve cut interest rates by 50 basis points. In such an instance, a long position opened at 5,634 points on Sept. 17 and closed at 5,713 points two days later delivering a 1.4% gain.
| Start Date | Start S&P 500 Price | End Date | End S&P 500 Price | Profit % |
|---|---|---|---|---|
| Jan 30, 2024 | 4,924.97 | Feb 1, 2024 | 4,906.19 | -0.38% |
| Mar 19, 2024 | 5,178.51 | Mar 21, 2024 | 5,241.53 | +1.22% |
| Apr 30, 2024 | 5,035.69 | May 2, 2024 | 5,064.20 | +0.57% |
| Jun 11, 2024 | 5,375.32 | Jun 13, 2024 | 5,433.74 | +1.09% |
| Jul 30, 2024 | 5,436.44 | Aug 1, 2024 | 5,446.68 | +0.19% |
| Sep 17, 2024 | 5,634.58 | Sep 19, 2024 | 5,713.64 | +1.40% |
| Nov 6, 2024 | 5,929.04 | Nov 8, 2024 | 5,995.54 | +1.12% |
| Median: +1.1% |
Patience Pays: Longer Holds Double Returns
While short-term strategies around Fed meetings have been profitable, holding the S&P 500, as tracked by the SPDR S&P 500 ETF Trust SPY, for 15 sessions post-meeting significantly amplifies returns.
Investors using this extended strategy achieved an average profit of 3.29%, more than double the one-day gain.
Crucially, every Fed meeting this year resulted in a positive return over the 15-session period.
The data supports the notion that investors often require more time to fully digest the implications of a Fed meeting, underscoring the importance of patience and the benefits of holding onto stocks rather than succumbing to the temptation of selling in the immediate aftermath.
| Start Date | Start Price | End Date | End Price | Profit % |
|---|---|---|---|---|
| Jan 30, 2024 | 4,924.97 | Feb 22, 2024 | 5,087.03 | +3.29% |
| Mar 19, 2024 | 5,178.51 | Apr 11, 2024 | 5,199.06 | +0.40% |
| Apr 30, 2024 | 5,035.69 | May 22, 2024 | 5,307.01 | +5.39% |
| Jun 11, 2024 | 5,375.32 | Jul 5, 2024 | 5,567.19 | +3.57% |
| Jul 30, 2024 | 5,436.44 | Aug 21, 2024 | 5,620.85 | +3.39% |
| Sep 17, 2024 | 5,634.58 | Oct 9, 2024 | 5,792.04 | +2.79% |
| Nov 6, 2024 | 5,929.04 | Nov 29, 2024 | 6,032.38 | +1.74% |
| Median: +3.29% |
Will December Break The Trend? The Stakes Are Higher
As the Federal Reserve prepares for its final policy meeting of 2024, all eyes are on whether markets will continue their winning streak or finally break the trend. Investors broadly anticipate a 25-basis-point rate cut, bringing the target range to 4.25%-4.5%.
Yet the true driver of market reactions will likely be the Fed’s updated macroeconomic outlook, which includes forecasts on inflation, growth, and interest rates for the next three years.
The backdrop for this meeting is notably different compared to earlier in the year. Recent economic data has shown unexpected resilience, complicating the Fed’s path forward.
Consumer inflation rose for a second consecutive month in November, reaching 2.7% year-over-year, while producer prices accelerated to 3%, their fastest pace since February 2023. Signs of economic strength extend further: retail sales surged beyond expectations in November, while business activity in the services sector posted its strongest expansion since late 2021.
Powell Now Holds Market Pendulum
For Fed Chair Jerome Powell, the task will be delicate. He must strike a balance between acknowledging persistent economic momentum and reassuring markets that policymakers remain committed to a gradual path of rate cuts.
Any signal that rate reductions could slow in 2025 may test investor optimism, particularly as Fed funds futures price only a 60% chance of another cut by March.
This makes December’s meeting a critical juncture.
If Powell’s remarks reinforce confidence in the Fed’s ability to guide a soft landing for the economy, the S&P 500 could extend its streak of positive returns seen around FOMC decisions this year. On the other hand, a more cautious tone, hinting at concerns over sticky inflation or the need to pause rate cuts, could deliver a reality check to markets that have grown accustomed to steady gains.
The question is no longer just about another short-term bounce. Instead, December’s meeting may set the tone for market sentiment heading into 2025.
Read Next:
Fed Chair Jerome Powell illustration created using artificial intelligence via Midjourney.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
