Fed Meetings Can Create Market Stress
Since 2014, the average annualised global equities volatility has been around 8.9%. When looking at volatility changes before and after the past 50 Fed meetings, a striking pattern emerges. Five days before the meeting, volatility decreases to an annualised average of 8.3% before climbing to the much higher level of 9.8% over the following five days. This higher volatility period does not last for long, however: just 20 days later, volatility is back to its long-run level. The Fed can therefore create stress in markets, but it does not usually last for long. Will this time be different?
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