S&P 500 ETFs have fared well during recent rate hike days. Does the trend continue?

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Matteo Colombo

The S&P 500 (SP500) along with its benchmark tracking exchange traded funds tend to fare well on days that Jerome Powell and the Federal Reserve decide to raise rates.

History has shown since the Fed started raising rates back in mid-March the S&P is down roughly 10%, but the index itself actually gained 1.5% or more on each of the three Fed days.

On the first 25 basis point hike day the S&P moved up 2.2%, the second 50 basis point hike resulted in a +3% move for the index, and the latest 75 basis point hike resulted in a +1.5% move in the S&P 500.

With that being understood, ETFs that mirror the price movements of the index such as the SPDR S&P 500 ETF Trust (NYSEARCA:SPY), iShares Core S&P 500 ETF (NYSEARCA:IVV), and Vanguard 500 Index Fund (NYSEARCA:VOO) may be primed for higher moves if history repeats itself.

As the market opened up on Wednesday the S&P 500 has gained 1.1% early on helping to further the trend.

From a rate hike vantagepoint, the markets are now pricing in a 75-basis-point hike with a smaller chance of 100 basis points this afternoon as all eyes are on the FOMC’s decision.