Santa Claus Fed and equity returns: James Saft
By James Saft
(Reuters) – Since 1994, according to the New York Federal Reserve, 80 percent of U.S. stocks’ excess returns occurred in the 24 hours before scheduled announcements by the Federal Open Market Committee.
There can be no single data point that better explains the madness of official monetary policy in its interaction with financial markets.
As explained in a recently updated paper by New York Fed economists David Lucca and Emanuel Moench, an enormous proportion of the equity risk premium – the extra return investors get for holding stocks – occurs in the window directly around Fed policy announcements. James Dalgleish)
(At the time of publication, Reuters columnist James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. For previous columns by James Saft, click on)