SOURCE: Russell Investments

Russell Investments

September 12, 2012 16:56 ET

Measuring Market Expectations: Russell Indexes Show Market Anticipation & Reaction to FOMC Monetary Stimulus

SEATTLE, WA--(Marketwire - Sep 12, 2012) - Russell Indexes has analyzed the market's reaction to the past three announcements of monetary stimulus by the Federal Reserve by noting the returns of the U.S. large cap Russell 1000® Index for the week prior to, and three months after, the announcements of QE1, QE2 and Operation Twist.

Russell 1000® Index -- Performance Before & After QE1, QE2 & Operation Twist
FOMC Policy Announcement   One Week Prior to Announcement   3 Months After Announcement
Operation Twist (Sept. 21, 2011)   3.35%   3.80%
QE2 (Nov. 3, 2010)   0.80%   10.44%
QE1 (Nov. 25, 2008)   -0.20%   -8.25%

The U.S. large cap equity market, as reflected by the Russell 1000 Index, has returned slightly more than 2% in the past week through September 11, 2012. 

"The markets appear to have fully priced in the expectation that Bernanke and the FOMC will announce a definitive direction on further quantitative easing to conclude this week's meeting," said Russell Indexes senior research director Tom Goodwin. "If these expectations are met, it may be further fuel for advancement of the major market indexes, but we do run the risk of a market correction if investors are disappointed by a less than satisfactory announcement from the FOMC on Thursday."

Source: Russell Investments

The Russell Global Index includes more than 10,000 securities in 48 countries and covers 98% of the investable global market. All securities in the index are classified according to size, region, country and sector. Daily Returns for the main components are available here: