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Federal Reserve Board Chairman Ben Bernanke appears before a Senate Banking, Housing and Urban Affairs Committee in Washington February 26, 2013.JASON REED/Reuters

Skeptics of the current bull market like to point out that the gains have been driven by the policies of the Federal Reserve – namely, cutting its key interest rate to zero, committing to keep the rate low and buying billions of dollars worth of assets through a succession of quantitative easing programs.

Turns out, these skeptics have a point: Stocks have shown unusual strength on "Fed days," when the central bank releases its latest monetary policy statement and, more recently, Fed chairman Ben Bernanke takes questions from the press.

In mid-morning trading, Wednesday is looking like a good example. With the Fed set to deliver its statement in the afternoon, the S&P 500 is already up more than 9 points or 0.6 per cent, to 1558.

But the trend over the past four-plus years is far more impressive. Bespoke Investment Group looked at the reaction from the S&P 500 on Fed days, going back to December 2008, when the Fed cut its key rate to rock-bottom during the financial crisis. Including that day, they discovered that Fed days alone (34 of them) have accounted for more than 30 per cent of the market's gains.

According to Bespoke, the index has risen 65 per cent of the time on Fed days, for an average gain of 0.63 per cent – well above the average gain of 0.38 per cent on Fed days going back to 1994.

The impressive gains since 2008 have come with only one rate cut, so investors have obviously taken their cues from other elements of Fed policy. That's where quantitative easing comes in: markets have taken kindly to announcements of asset buying – which holds down borrowing costs and encourages investors to seek returns beyond cash and bonds – and signals that the stimulative programs will remain in the Fed's arsenal indefinitely.

Some lines in its statement have been catnip for investors – such as "without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labour market conditions"; and "exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015."

However, policy can change. As the Financial Times reported on Tuesday, some bond market veterans are "hearing echoes of 1994," when the Fed unexpectedly raised its key rate, and continued to do so through the year, turning investments upside down. The S&P 500 ended the year down 1.5 per cent, interrupting three years of gains.

No one expects the Fed to raise rates this year, or even next year. Maybe not even the year after that, if the U.S. unemployment rate fails to fall to 6.5 per cent (it sits at 7.9 per cent right now).

But as the Times noted, the wild card is if the U.S. labour market improves – as it did in 1994 – faster than the Fed expects. That could catch investors by surprise, and would most likely ruin the impressive gains seen on Fed days.

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