According to a note from Bespoke Investment Group this afternoon, a review of trading data on the occasion of the preceding seven Federal Open Market Committee meetings over the last 12 months shows that every time the market rises in reaction to the FOMC in the last two hours of the trading session, it falls the next day, by 1.86% on average. Conversely, when the market’s fallen after the FOMC announcement, it rallied back the next day by 0.74%, on average.
“After mulling it over for awhile, investors look at the initial reaction and view it as an over-reaction,” the authors write.
So, the S&P 500 fell in the last two hours of the session post the FOMC announcement to close at 1,109.18.
Will it rise tomorrow?
Correction: Paul Hickey with Bespoke was kind enough to point out that the data refer to the final two hours of the trading day, not the entire day. Hence, today’s S&P session actually sold off post-FOMC, despite the index being up for the day.
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