Pre-FOMC drift

Lucca and Moench documented a pre-FOMC drift: a large share of U.S. equity excess returns in their sample arrived in the hours and day before scheduled FOMC announcements. A rules-based expression is long the equity index into the scheduled announcement window and flat once the window ends. It is a calendar around a known meeting, not a bet on the policy decision.

Not investment advice. Nothing here is a recommendation to buy or sell anything. Backtests and historical studies are not guarantees, and a rule that worked in one sample can fail in the next. Trading can lose money. Links are for education, not endorsements. Do your own research.

Rules

From the Federal Reserve calendar, enter a long equity-index position a fixed time before the scheduled statement, such as the prior close or the prior day, and exit at the statement or at the close of announcement day. Do not condition the trade on the rate decision, which is not known at entry. Skip emergency meetings that were not on the calendar.

Where AI fits

AI can merge the official meeting calendar with intraday or daily index data and can keep unscheduled meetings out of the sample. It can test one precommitted window. A model that reads the statement and then decides the entry has the timing backwards.

Markets

U.S. equity indexes, which is the market in the original study. Other assets need their own test.

Timeframes

The day and hours before a scheduled FOMC announcement. Meetings are roughly eight times a year.

Risks

The drift is a historical pattern around a small number of events per year, and it can change as the Fed's process changes. Event gaps cut both ways. Costs and overnight gap risk matter because the window is short. Past concentration of returns in that window is not a forecast.

← Back to all strategies