Saturday began the FOMC’s blackout period meaning there will be no communication from Fed officials for the next several days until the May 3rd meeting (Hooray). As of Monday afternoon, the CME’s FedWatch Tool is pricing in a nearly 90% chance of a 25 bps hike at that meeting.
In the chart below, we show the performance of the S&P 500 from the end of a Fed day until the start of the blackout period for each inter-meeting period since 1994 when the FOMC began announcing its rate decisions on the same day as the meetings. Since the current tightening cycle began a little over a year ago, most periods between meetings and blackouts have seen the S&P 500 turn lower with a median decline of 0.53%. One notable exception to that weakness was after the meeting last November when the S&P 500 went on to rally over 8% leading up to the blackout period. That was the strongest run for the S&P 500 from meeting to blackout since June 2009. As for more recently, the 5% gain from the March meeting through last Friday again stands out ranking as the second strongest of the current tightening cycle (out of ten).
In the chart below, we show the performance from the start of each past blackout period up through the last close prior to the FOMC meeting. Again, the current tightening cycle has tended toward weak performance for the S&P 500 with more declines than gains. However, the last blackout period in March saw the strongest gain for the S&P 500 since the runup to the June 2020 meeting.
Although there has been some strength during and leading up to blackout periods more recently (especially relative to earlier this tightening cycle), over the full history of the data, strong performance ahead of the blackout period is not a good explainer of performance during the blackout period itself. As shown below, there has historically been a wide dispersion of results without much in the way of a trend. In other words, the strong performance headed into the blackout period in and of itself does not mean it will continue as Fed speakers go quiet.
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