It’s about time. Since he took over as Federal Reserve chairman last year, Jerome Powell had run up a streak of S&P 500 sell-offs on Fed Day, when the central bank’s policymaking arm meets. But that dubious record—seven in a row, according to Bespoke Investment Group—came to an end Wednesday.
The S&P 500 advanced 1.6%, as the Fed indicated that it would be “patient” about hiking interest rates and would end its effort to reduce its $4 trillion-plus balance sheet, an action that also tends to push up rates. Powell told a news conference that the reduction would cease “sooner and with a larger balance sheet” than previous statements had estimated.
Powell’s poor market performance on Fed Day was out of sync with how stocks had behaved for his predecessors. The S&P 500 averaged a gain of 0.28% on Fed Days since 1994, Bespoke stated. In fact, the record of Powell’s successor, Janet Yellen, was far superior on Fed Day. Ed Yardeni, the economist, once in jest called her the “fairy godmother” of the bull market.
Powell had the bad fortune to assume leadership of the Fed during a rocky year for the market, which included two corrections—dips of at least 10% from the recent peak—one right after he became chair. In part, that turbulence was due to fear that the Fed would boost rates faster than the economy could stomach, touching off a recession.
But stocks have staged a modest comeback in 2019 thus far, advancing almost 7%. Last year, the Fed hiked short-term rates four times, and several months ago, the betting was for a similar schedule this year. Now, however, futures pricing implies no increases in 2019.
If so, then maybe Powell will enjoy a more buoyant market on Fed Days up ahead.