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20 ETFs Primed For Unusually Big Swings On Fed Meeting Days

Benzinga ·  07:40

As markets brace for the Federal Reserve's final policy meeting of the year, scheduled at 2:00 p.m. Wednesday, Goldman Sachs highlighted 20 exchange-traded funds (ETFs) that have historically shown outsized moves around Fed decision days.

While a 25-basis-point rate cut to a target range of 4.25%-4.50% is widely anticipated, the market's focus is on the Fed's forward guidance, particularly the Summary of Economic Projections (SEP) and the updated "dot plot."

Following December's expected cut, Goldman Sachs projects a more measured pace of easing next year, forecasting rate cuts in March, June, and September, with the terminal rate seen at 3.50%-3.75%.

Read Also: All Eyes On December Fed Meeting As Traders Await Interest Rate Projections

Market Dynamics Around Fed Days

U.S. equity markets have displayed strong short-term gains during Fed meeting weeks in 2024.

Investors employing a simple strategy of buying the S&P 500 index at market close before a Federal Open Market Committee (FOMC) announcement and selling at close the following day have captured median returns of 1.1% across the past seven meetings.

Yet those extending the trade horizon to 15 sessions post-Fed meeting have enjoyed significantly larger average gains of 3.29%, more than double the short-term returns. Notably, every Fed meeting this year has resulted in positive 15-day returns.

"We observe that U.S. banking ETFs, such as SPDR S&P Bank ETF (NYSE:KBE) and SPDR S&P Regional Banking ETF (NYSE:KRE), have seen unusually large moves on FOMC days since 2022" Goldman analysts wrote in a recent note.

For bond-focused investors, the report highlights consistent post-meeting gains in high-yield and investment-grade ETFs like iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:HYG) and iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE:LQD).

Meanwhile, energy-focused ETFs, such as the United States Oil Fund (NYSE:USO), have seen negative reactions.

ETFs Showing Heightened Fed-Day Moves

Here's Goldman Sachs' list of 20 ETFs with the largest absolute moves – which include both positive and negative swing – on FOMC days:

ETF NameFocusAverage Absolute Move on FOMC since 2022Average Absolute Move (Last 3 FOMC events)
SPDR S&P Regional Banking ETF Regional Banking2.5%1.5%
VanEck Semiconductor ETF (NASDAQ:SMH)Semiconductor2.4%3.7%
iShares Semiconductor ETF (NASDAQ:SOXX)Semiconductor2.4%3.3%
SPDR S&P Bank ETF (NYSE:KBE)US Large Banks2.2%1.3%
SPDR S&P Biotech ETF (NYSE:XBI)Biotech2.0%0.3%
United States Oil Fund Oil1.9%2.0%
Technology Select Sector SPDR Fund (NYSE:XLK)Technology1.9%2.3%
iShares Silver Trust (NYSE:SLV)Silver1.7%2.4%
Invesco QQQ Trust (NASDAQ:QQQ)Nasdaq 1001.7%1.7%
Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY)Discretionary1.6%1.0%
iShares Russell 2000 ETF (NYSE:IWM)Russell 20001.5%0.3%
SPDR S&P 500 ETF Trust (NYSE:SPY)S&P 5001.2%0.9%
Vanguard S&P 500 ETF (NYSE:VOO)S&P 5001.2%0.9%
Financial Select Sector SPDR Fund (NYSE:XLF)Financial1.1%0.7%
SPDR Gold Shares (NYSE:GLD)Gold0.9%1.4%
iShares J.P. Morgan USD Emerging Markets Bond ETF (NASDAQ:EMB)EM Bond0.8%0.6%
iShares iBoxx $ High Yield Corporate Bond ETF HY Corp Bond0.6%0.3%
iShares iBoxx $ Investment Grade Corporate Bond ETF IG Corp Bond0.6%0.7%
iShares 7-10 Year Treasury Bond ETF (NASDAQ:IEF)7-10 Year Treasury0.6%0.7%
iShares TIPS Bond ETF (NYSE:TIP)TIPS Bond0.5%0.4%
Average1.5%1.3%

Check Out:

  • Fed Meetings Made Stock Traders Richer In 2024: Could Wednesday Bring Last Big Rally?

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