A longstanding phenomenon known as ‘Fed drift’ has mostly disappeared from markets since the beginning of 2023, according to DataTrek Stocks used to reliably drift higher ahead of Federal Reserve policy meetings, contributing to nearly all of the S&P 500’s calendar-year returns and piquing the interest of economists.

But one analyst has found that this longstanding phenomenon has seemingly vanished.

The pattern was originally termed the “Fed drift” by a team of academics at the New York Fed, who first identified it in a paper published in 2011 that examined market returns going back to 1994. That stocks would rise so reliably ahead of Fed meetings caught their attention because it was so puzzling.

After all, financial theory dictates that investors are supposed to demand a discount ahead of risky events like Fed meetings, pushing stocks higher only once the risk had passed. Here, the theory seemed to play out in reverse, time and time again.

Examining returns for the S&P 500 between Tuesday and Thursday of Fed weeks, the team found that the index rose, on average, nearly 0.5% during the run-up to the central bank’s Wednesday afternoon announcement and continued to drift higher afterwards.

These substantial excess returns meant that nearly all of the S&P 500’s calendar-year gains could be attributed to this phenomenon.

After revisiting the topic in 2018, the economists found that the market’s large excess returns in advance of Fed meetings had grown less frequent since 2011. They were now only observable ahead of meetings that featured both a press conference and the release of updated economic projections.

Now the phenomenon has disappeared entirely.

Nicholas Colas, co-founder of DataTrek Research, crunched the numbers and concluded that the phenomenon as originally documented by the team of New York Fed economists in 2011 is “dead.”

To be sure, much has changed since 2018. The Fed now holds press conferences following every meeting. And between 2022 and 2023, the central bank hiked interest rates at the fastest pace since the 1980s, pushing them to their highest level in more than 20 years as the U.S. grappled with its worst wave of inflation in four decades.