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In One Chart: Here’s how the stock market has handled Fed decision days under Jerome Powell

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Federal Reserve Chairman Jerome Powell will take the podium at the Eccles Building Wednesday afternoon for his 39th “Fed Day” since becoming the world’s most influential central banker back in 2018.

And although Powell has occasionally sent markets reeling, like he did after the Federal Open Market Committee’s previous meeting that concluded on Sept. 21, generally speaking, his pronouncements have helped to boost stocks in the hours after these meetings have ended.

Since Powell took over, the S&P 500 index
SPX,
-0.74%

has averaged a gain of about 0.3% on “Fed days,” according to an analysis by Bespoke Investment Group.

That’s better than the roughly 0.2% average gain for the large-cap index under Powell’s predecessor, current Treasury Secretary Janet Yellen, who served as Fed chief for just one term between 2014 and 2018.

It’s also better than the average “Fed day” performance from the Greenspan era. Former Fed chairman Alan Greenspan helmed the Fed for nearly 20 years from 1987 to 2006.

Of the four most recent Fed leaders, only Ben Bernanke, who served as Fed chairman for nearly eight years between 2006 and 2014, presided over a stronger average “Fed day” gain: the S&P 500 rose roughly 0.6% on days where Fed policy meetings were held during his tenure, according to Bespoke.

So far, 2022 has been a rocky year for stocks and bonds, with the S&P 500 down 19.6% as the Fed has aggressively raised its benchmark interest rate at the fastest pace since at least the 1980s to try and tame rampant inflation.

Stocks have tended to rally during days where the Fed has announced its rate hikes, starting this year with the meeting that ended on March 16. The September meeting where the Fed delivered its third consecutive 75 basis point hike was the lone exception.

However, these gains have often reversed almost as quickly as they arrived, as Nicholas Colas, co-founder of DataTrek Research, pointed out in a note to clients.

“US stocks have tended to rally the day of a Fed announcement, but they give back those gains the next day and end up basically flat a week later,” he said.

With stocks coming off an October rally this week, the S&P 500 was off 0.5% on Wednesday as investors waited to hear what Powell might say about the Fed’s rate-hike plans in December and heading into next year. The Nasdaq Composite
COMP,
-5.69%

was down 0.6%, while the Dow Jones Industrial Average
DJIA,
-0.38%

was down 0.4%.

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