It is the date of the decision of the Federal Reserve – a day that has not given much to the stock markets in the markets when Jerome Powell took over as chairman in 2018.
The S&P 500 Index
SPX, + 0.20%
has fallen on nine of the last 10 last days of the federal open market committee, "and the 10 days also coincide with the entire current era FOMC President Jerome Powell , "noted Paul Hickey, co-founder of Bespoke Investment Group, in a note.
The only positive finish came just in January when the Fed unexpectedly swung away from its ever-rising prices policy to move to the sidelines. S & P 500 ended 1
Stock market gains or losses on the meeting day are probably not a terribly useful metric for judging Fed's performance, but considering the decision-making case attracts investor attention, especially considering Wednesday's decision. The Fed is not expected to cut, but investors are looking for politicians to set the stage for relief already in July.
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While recognizing the small sample of Powell's three predecessors, Janet Yellen, Ben Bernanke and Alan Greenspan – Hickey S & P 500 & # 39; s decision-making performance under Powell's government as "abysmal" on both absolute and relative basis, with S & P 500 averaging 0.3% down on average gains of between 0.16% below Yellen to 0 , 53% under Bernanke.
And while S & P has seen positive Fed day turns only 10% of the time during Powell, it experienced gains more than half the time during all its three predecessors (see chart below).
The macro-strategic director of Deutsche Bank Alan Ruskin has also looked at Fed performance and was skeptical that Powell would break the pattern of given investors' high hopes for a solidly modest message, as reflected by interest rate terminals showing a 1-in-5 chance of a cut on Wedne sday and a 100% probability of quarterly cut in July.
Stocks and other risky assets "seem nicely set up so there's plenty of room for the Fed to disappoint the market again and make it 10 out of 11 disappointed FOMC days," he said in a note.
Fed's biggest dilemma is actually "how to maintain maximum policy" opportunity for July without having risky assets reprice heavily negative, "he said. Ruskin elaborated on the dilemma in his note:
One of the more popular The reasons why the Fed should fail are that US economic conditions are only so easy because they are based on poor Fed expectations, the Fed is undoubtedly paying particular attention to this, so Powell will at worst try to ease the market. But the Fed will also rely on the notion that if growth data in the future does not justify a rate cut, then the stronger growth it entails will ultimately provide protection for risky assets, smoothing any Market Adjustment for a Less Poor Fed View.
Nevertheless, the scale of the risk of easing and the latitude that soft inflation allows for accommodation, will Fed signaling indicated that bias in politics has shifted sharply in favor of easing.
The focus will be on the dot plot that maps each policy maker's rate expectations, he said. "If there are more than 5 dots expecting a cut, ordinary voters will also have been dragged into the camp in 2019," he said. "Less than 4 dots for relaxation in 2019 would be more hawkish than expected and add to the risk negative response."
See: History suggests that the Fed cannot make "insurance cuts" to keep expansion alive
Overall, stock exchanges on the stock exchange may not have so much to complain about so far. The S&P 500 remains around 1.2% during its full-time job in April, while the Dow Jones Industrial Average
DJIA, + 0.26%
remains about 1.6% away from its record set in the fall.
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As for Fed day performance, Hickey recommended, "Look at the bright side, there's plenty of room for improvement!"