Just the data please! I was a bit shocked, as you may be as well, to see that all of the net gains in the S&P 500 index from June 30, 1997 through December 22, 2015 have come on Fed days. Since mid-1997, the Fed has met 149 times. The meetings typically last two days with the announcement made on the second day. The daily percentage change for the S&P 500 index on the day prior to the Fed announcement averaged 0.17% and the daily percentage change on the announcement date averaged 0.36%. On all of the other trading days, the S&P 500 daily average percentage change was 0.01%.
Here is what it looks like if you removed the Fed dates (right).
It is important to note that there were periods of time since mid-1997 when the Fed raised rates and periods when they lowered rates. The popular tune, “All about that bass, bout that bass, no treble,” rings in my ears. All about that Fed, bout that Fed, no trouble.
“Don’t Fight the Fed” is a popular saying on Wall Street. The above data supports that view. And frankly, this is one of the reasons I post the Don’t Fight the Fed or the Trend data each week in Trade Signals. I believe that looking at various historical data points can help me better assess the risk and reward probabilities moving forward.
I get a lot of questions about Trade Signals from both readers and my own team. “What does this or that have to do with your management process?” “If your CMG NDR Large Cap Momentum indicator is in a sell, why is my Opportunistic All Asset Strategy currently overweight equities?” “Sometimes one signal says x and the other says y?” I get it. Confusing.
Today, and moving forward, I’m going to try my best to answer these questions. I hope to share how I view the importance of the various signals and how we may use them in our work here at CMG. A long time ago a friend asked me if I could share my Trade Signals with him. Now I share them with thousands of advisors. As a side note, please keep sending me your questions. They help me.
The current opinions and forecasts expressed herein are solely those of Steve Blumenthal and are subject to change. They do not represent the opinions of CMG. CMGs trading strategies are quantitative and may hold a position that at any given time does not reflect Steve’s forecasts. Steve’s opinions and forecasts may not actually come to pass. Information on this site should not be used as a recommendation to buy or sell any investment product or strategy.