Stocks Gain on Fed Day as Jefferies Searches for ‘Jell-O Shots’
Days when the Federal Reserve announces its policy decisions are so good for the U.S. stock market that you’d be forgiven for wondering why they don’t have them more often.
The Standard & Poor’s 500 Index gained an average of 0.5 percent each Fed day since the central bank cut rates to near zero in 2008, according to Bespoke Investment Group. The average gain has been 0.35 percent since 1995 when the Fed began announcing decisions on the day of their meeting, according to Bespoke. While the trend has hit a few bumps in the road recently, with stocks falling six of the last nine times, the decision to taper stimulus in December was still good for a 1.7 percent rally.
Many in the markets think they have figured out what today’s episode will entail -- another $10 billion reduction in monthly bond buying and perhaps hints that the Fed will consider a more flexible metric for increasing interest rates, rather than the firm data point of 6.5 percent unemployment.
Even Janet Yellen’s first press conference as Fed chair isn’t lending much mystery to this episode.
According to David Zervos, chief market strategist of Jefferies: “Her cards are already on the table. She will almost surely give us a warm and fuzzy feeling as she describes the outlook for monetary policy.”
Zervos points to Yellen’s comments about there still being too many Americans unable to find a job or forced to work part-time for her rationale in keeping rates low for longer.
“Dammit Janet, that makes me feel good!!” he wrote in a note to clients. “I just want to rip every risk asset off the shelf and lever up using more of those ever-present Jell-O shots!”
So how do you play this market? According to Bespoke’s analysis, which includes yesterday’s rally in the math, the stock market should be bought at the open and sold around 3 p.m. to avoid a late-day selloff that has been typical of the average day since 2008.
Save the Jell-O shots for happy hour.