Excerpt from Barron’s quoting DataTrek’s Nick Colas:
…. “he latest New York Fed research builds on an older 2011 Fed study by the same authors, which discovered the Fed Drift. Those findings, “The Pre-FOMC Announcement Drift,” was “nothing short of jaw-dropping” then, says Nicholas Colas, co-founder of DataTrek Research.
According to the paper, from 1994 to 2011, an average 80% of the S&P 500’s excess returns above the risk-free rate—the one-month Treasury bill yield—occurred in the three days around FOMC meetings. This began the morning before a rate decision and continued through the day after the FOMC released its statement. This positive Fed Drift higher also applied to German, British, French, Spanish, Italian, and Canadian stock markets.
In a nutshell, notes Colas, you could have beaten the S&P 500 by simply overweighting U.S. stocks the day before an FOMC meeting and going back to a neutral weight the day after their announcement”….
Read the rest of Nick’s comments and the full article here in Barron’s!