Tomorrow, the FOMC will meet for the second time this year and based upon CME Group’s FedWatch Tool there is a 95.2% chance they will announce a rate increase when the meeting ends on Wednesday, March 15. Should they ultimately raise rates it will be just the third time since December 16, 2015. Going forward with a similar pace and magnitude of increases (one .25 increase in the range every 5 months) it will be another 40 months before the top of the range reaches 3%. Even at that level, rates would still be rather accommodative within historical context.
In the following chart the 30 trading days before and after the last 72 Fed meetings (back to March 2008) are graphed. There are three lines, “All”, “Up” and “Down.” Up means the S&P 500 finished announcement day with a gain, down it finished with a loss. Down announcement days have generally been the best buying opportunity while up announcement days were more frequently followed by weakness.
Of the last 72 announcement days, the S&P 500 finished the day positive 43 times. Of these 43 positive days S&P 500 was down 24 times (55.8%) the next day. Of the 29 down announcement days, the following day was down 16 times (55.1%). All 72 announcement days have 0.46% average S&P 500 gains while the day after has been a net loser with S&P 500 shedding 0.32% on average.