Fed Meetings Made Stock Traders Richer In 2024: Could Wednesday Bring Last Big Rally?

The U.S. stock market has generally delivered solid gains around Federal Reserve meetings in 2024, signaling investor optimism as the central bank prepares for its final policy decision of the year on Wednesday.

An investor adopting a short-term long strategy — buying the S&P 500 index at market close the day before a Fed meeting and selling at the close the day after — would have realized a median return of 1.1% over the last seven meetings.

According to data compiled by Seasonax, this strategy has yielded positive returns six out of seven times this year.

The best-performing event came during the September FOMC Meeting, when the Federal Reserve cut interest rates by 50 basis points. In such an instance, a long position opened at 5,634 points on Sept. 17 and closed at 5,713 points two days later delivering a 1.4% gain.

While short-term strategies around Fed meetings have been profitable, holding the S&P 500, as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY), for 15 sessions post-meeting significantly amplifies returns.

Investors using this extended strategy achieved an average profit of 3.29%, more than double the one-day gain.

Crucially, every Fed meeting this year resulted in a positive return over the 15-session period.

The data supports the notion that investors often require more time to fully digest the implications of a Fed meeting, underscoring the importance of patience and the benefits of holding onto stocks rather than succumbing to the temptation of selling in the immediate aftermath.

As the Federal Reserve prepares for its final policy meeting of 2024, all eyes are on whether markets will continue their winning streak or finally break the trend. Investors broadly anticipate a 25-basis-point rate cut, bringing the target range to 4.25%-4.5%.