Jaldekoa / Will-the-Fed-ruin-my-SP500-investments

Based on Quantdare blog: https://quantdare.com/will-the-fed-ruin-my-sp500-investments/

Will the Fed ruin my S&P500 investments?

Fed announcements have an impact on the market. Can these events ruin investments in the S&P 500?

Data

In the following experiment, I used the S&P500 returns and the Fed conference calendar from 2017-01-01 through 2023-09-25. This information was extracted from the following link.

In the next figure, one can see the evolution of the cumulative returns of the S&P500 and the days in which the Fed gave a press conference.

S&P500 Index (SPY) evolution + Fed Press Conference Days

Strategy

To test whether Fed announcements have a negative impact on S&P500 returns, the following strategy is followed:

• Our portfolio is invested (100%) in the S&P500 if there are no Fed press conferences scheduled in the next 2 days.
• If there is a press conference the next day, the current day or the day before, our portfolio is not invested (0%) in the S&P500.

With this simple strategy, we can deduce what the effect of Fed press conferences is on the value of the index.

Results

In the following figure you can see the evolution of the portfolio applying the strategy compared to the S&P500.

References

This project is based on the following article:

• Will the Fed ruin my S&P500 investments?: https://quantdare.com/will-the-fed-ruin-my-sp500-investments/