In one of the most startling studies I've ever seen, researchers from the Federal Reserve this week measured
how much the stock market is influenced by...the Federal Reserve. Their
conclusion: "Since 1994, [stock] returns are essentially flat if the
three-day windows around scheduled FOMC announcement days are excluded."
The Federal Reserve announces what it's going to do to interest rates
eight times a year at Federal Open Market Committee meetings. These are
scheduled in advanced and well-publicized, so investors know exactly when the goods are coming.
Since 1994 (when the Fed started publicizing its moves), the S&P
500 has risen from 450 to 1300. But remove the 24 hours just prior to
FOMC announcements, and returns fall to almost nothing:
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