Turns out there is a sure thing in the stock market — and it happens eight times a year

You can capture most of your stock gains by trading 24 hours ahead of the Fed policy statements, eight times/year

Turns out there may be free lunch from the people who brought us zero interest rates. All you need to do is  buy stocks as  the Federal Reserve board members gather in Washington, D.C.,  to discuss monetary policy. Really.

It sounds completely crazy, and even the brainiacs at the NY Fed who wrote a study on this phenomenon are completely befuddled. But the so-called “stock drift” is  real.

Here’s the back story. In 1994, the  Federal Open Market Committee began releasing a statement about interest rates and other key monetary policy issues after each of its regular eight policy meetings. That was part of a move to make the Fed more transparent. The announcement typically comes at 2:15 ET.  Ever since then, in the 24 hours running up to that moment, the annual return on those days for stocks  has been  3.89% versus 0.89% on non-FOMC days.  It accounts for 80% of the premium investors can reap on stocks for the entire year.

And here’s what makes the pattern so wacky: Only stocks benefit from the pre-FOMC announcement bounce. Not bonds. Not forex. After the FOMC announcement, things get dicey but for the most part, the gains hold, the NY Fed says.

One last chart to show just what they are talking about:

Excess trading returns leading into the FOMC statement. Crazy.

The next FOMC statement will come August 1. Here’s a calendar for the rest of the year. It could come in handy.

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