They examined stock market returns over the past two decades and discovered that virtually all of the excess return occurs in a series of 24-hour periods eight times a year. Take away those 24-hour periods, and stock market returns are about what you’d expect them to be.
So what are these 24-hour periods? They’re the periods from noon the day before Federal Reserve announcements until 2:15 on the day of the announcement. During those periods, stocks rise an average of about 50 basis points. That’s the red line in the chart on the right. During every other three-day period, stocks do nothing on average. That’s the black line at the bottom of the chart.
What does this mean in aggregate? Since 1994, the S&P 500 has risen from about 400 to 1300. If you remove the three-day periods surrounding FOMC announcements, it’s barely risen at all.