Today's FOMC monetary policy decision may be a key for the future outlook of S&P 500 (US500) as well as other equity indices. Equity markets try to recover following a very poor first half of 2022 but further monetary policy tightening may prove to be an obstacle.
Taking a look at market reaction to recent FOMC decisions, we can see that S&P 500 usually dropped in the first minutes following the announcement (recent surprises were hawkish). On the other hand, taking a look at S&P 500's performance over 1 to 4 hours following the announcements, we can see that the index usually recovered previous losses. Nevertheless, S&P 500 pulled back over a 1-day or 1-week period following the past two decision announcements. A point to note is that recent FOMC decision tend to trigger bigger volatility spikes than announcements from the previous year.
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Source: Bloomberg, XTB Research
S&P 500 tends to drop in the first 30 minutes following the FOMC decision. Only the January decision saw a positive reaction this year over a 30-minute post-announcement period. Source: Bloomberg
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