While it barely made news, the Federal Open Market Committee (FOMC) last week held the first of its eight regularly scheduled meetings for the year. On Wednesday -- the day that the Fed released its policy statement from the meeting -- the S&P 500 gained 0.42%.
For those that have been following the markets for longer than a year or so, a change of 0.42% on a Fed Day seems pretty small. Up until just recently, the market would move around like a jumping bean on Fed Days as investors reacted to policy changes and tried to interpret what Ben Bernanke and his predecessor Alan Greenspan had just done. But it has now been 538 days since the Fed last changed the Fed Funds Rate, and the inactivity has become so telegraphed that traders are hardly aware of when the next Fed Day is, nor do they care.
At some point this will change, but for now Fed Days have basically become non-event days. To quantify this, we looked at the average absolute change of the S&P 500 on Fed Days over the last 10 Fed Days and calculated this going back to 1994 when the Fed started announcing policy changes immediately following their meetings. During the back half of the 90s and the first half of the 2000s, the S&P 500 was averaging a change of +/-0.80% to 1.20% on Fed Days. The peak 10-day volatility reading came in the thick of the financial crisis when the S&P averaged a +/- move of 2.36% over the last 10 Fed Days. As shown below, the average +/- move over the last 10 Fed Days has been 0.40%. This is a tick above the prior reading which was +/-0.37% and also the lowest reading ever. [..]
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