A look at the stocks and ETFs with the biggest reactions to the FOMC

Before today’s Fed (FOMC) decision, Goldman Sachs presents several recommendations aimed at capitalizing on the volatility during the meeting day.

First – The Big Picture:

According to the bank’s derivatives analyst, John Marshall, S&P index options are pricing in a move of +/-1.1% for today’s FOMC day. For comparison, the average expected move before the last four meetings was +/-0.8%. If today’s move materializes, it would still be smaller than the actual observed average move of +/-1.3% over the past four FOMC meetings, where in two of the cases the actual movement exceeded expectations. The December meeting saw an exceptionally large swing of +/-2.9%, despite expectations being unusually low at just +/-0.7%.

Historical Analysis:

Based on 15 years of historical analysis of U.S. macroeconomic events, Marshall finds that FOMC meeting days tend to show positive moves in assets like HYG, LQD, and IEF, while there’s a negative correlation in oil prices (though it’s unclear whether oil can physically fall much further after this year’s heavy drop).

Goldman identifies 20 stocks and 20 ETFs that have historically shown significant moves on FOMC days over the past three years. The list of stocks is heavily tilted toward the tech and financial sectors, while the ETF list highlights big moves in U.S. banks, corporate debt, biotech, and emerging markets.

Here’s the list of the 20 stocks that have made unusually large moves on FOMC days since 2022…

…and the same goes for the 20 leading ETFs:

Separately, Goldman notes that U.S. bank ETFs (like KBE and KRE) have posted unusually large moves on FOMC days since 2022. Despite the recent gains in U.S. financial stocks over the past month, these ETFs are still lagging behind their normal correlation with macroeconomic assets. The bank points out that KRE is trading at a 15% discount ahead of the FOMC meeting.

Meeting Expectations:

The bank’s economists expect interest rates to remain unchanged at the upcoming meeting, as the Fed is applying a higher threshold for rate cuts compared to the trade war period in 2019. The team forecasts three consecutive 25-basis-point cuts starting in July, bringing the final interest rate range to 3.5–3.75%.