Fed Days Throughout the Most Recent Hiking and Easing Cycles

Below we highlight the actions of the Fed and the S&P 500's performance around Fed days since Greenspan began hiking rates back in June 2004. Since then, the Fed Funds Rate has gone from 1% to 5.25% and back down to the 2.25% level that it's at today (with many expecting another 25 bps cut). On these days, the S&P 500 has been up 17 times and down 15 times for a median gain of 0.32%. March 18th was the third best day for the market on a Fed day since 1990, but the best when eliminating inter-meeting Fed days.

Comments

[David Lentz]

A 3-D chart showing this data with:
-- the time scale moving forward along the X-axis,
-- the magnitudes of the rates along the Y-axis,
-- the changes in the rates, the 1-day changes in the S&P, the week-after changes in the S&P, and the S&P changes to the next Fed meeting displayed as milestones along the Z-axis

... would show the effects (if any) of the Fed funds rate changes on the S&P as waves moving along the Z-axis as time moves forward along the X-axis.

This would be a lot more useful in picking out any trends or patterns in this data.

[[e-mail]]

If this current business cycle of credit easing and tightening repeats, the one you tracked above, the Fed funds rate would go down to 1% in 2009 stay there until 2011 and then rise to 5.25% in 2012. As the Fed funds rate declines, commodities and foreign currencies will drift up in US$ terms to mid 2010.

There is every reason to plan a repeat if the Fed funds cycle as the crash of stock prices in 2000 to 2003 is now replaced by a crash in real estate prices and an ongoing decline in stock prices and bond prices.