To borrow a phrase from a soliloquy in Shakespeare’s Prince Hamlet, ‘To pause or not to pause’, is the question investors have been toying with coming into Wednesday’s Fed meeting. Analysts are generally quite divided on what the Fed will do. Will the Fed maintain, and even extend its hawkish stance by pushing the terminal rate above 5%? Or will the Fed start to signal a coming pause and maybe even surprise markets with a lower 50 bps hike? (75bps is expected)
So, if the Fed surprises to the dovish side then that would typically immediately boost the S&P500. Lower interest rates mean both lower debt repayments and more spare consumer cash. So, if we do see a Fed surprising to the dovish side then the S&P500 strong seasonals become very relevant.
Over the last 25 years, the S&P500 has gained 18 times between November 01 and December 31 with an average gain of 2.86%. The largest gain has been 13.47% and the maximum loss has been -9.71% with the biggest drop of 14.21%.
Major Trade Risks: The major trade risk here is that the Fed takes a definite hawkish stance and that sends US stocks down for another leg lower.
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