Category: Educational
Publication Date: June 17, 2026
Today, pretty much the entire market is waiting for a single moment: tonight at 8:00 p.m. (Dutch time), the Federal Reserve will announce its interest rate decision. There’s no better time to explain why the market’s direction is everything to some investors, yet hardly matters to others.
It’s Wednesday afternoon, just past 1:00 p.m. The AEX is hovering around 1,074 points, up slightly by half a percent, just below last week’s record high. In the U.S., futures point to a higher opening: Nasdaq futures are up by more than half a percent, and tech stocks are rallying. Falling oil prices and easing tensions surrounding Iran are boosting sentiment. And yet, there’s actually little movement with conviction, because everyone is waiting for the same thing: the first interest rate decision under new Fed Chairman Kevin Warsh.
The market is pricing in a more than 97% probability of an unchanged interest rate (3.50 to 3.75%). But the decision itself isn’t what matters most. What matters is the tone, the so-called “dot plot” showing interest rate projections, and Warsh’s first press conference. In short: no one knows which way the market will go tonight. That won’t become clear until 8:00 p.m.
That is precisely where the difference lies between two approaches to investing.
Directional investing: you need a direction
With directional investing, you make money when the market moves in the direction you expect. If you buy a stock or an index, you gain when the price rises and lose when it falls. You’re taking a stance—consciously or unconsciously—on the direction.
Most investors do this. It’s intuitive, and in the long run, it has often paid off. But it also means that a day like today is nerve-wracking. If Warsh hints tonight that “interest rates will stay high longer,” stocks could come under pressure. If, on the other hand, he sounds reassuring, the same market could jump higher. Those who invest directionally are at the mercy of which way the coin lands.
And that coin sometimes lands unexpectedly. Less than two weeks ago, a strong U.S. jobs report fueled fears of interest rate hikes, and the Nasdaq lost more than 4% in a single day. A few days later, euphoria prevailed. Two completely different sentiments in less than a week.
Market-neutral investing: market direction doesn’t have to be your problem
A market-neutral strategy is structured differently. It aims to generate returns regardless of whether the market is rising or falling. This can be achieved, for example, by simultaneously capitalizing on both price increases and price decreases, or by combining positions in such a way that the overall result does not depend on the general market direction, but on other factors, such as the difference between two instruments, or a pattern that a system recognizes according to fixed rules.
The idea is not that a market-neutral strategy is “better” or risk-free. Every form of investing involves risk. The idea is that you don’t tie your return to a question that cannot be answered today: which way will the market go? A market-neutral strategy doesn’t need to predict Warsh. It simply follows its rules, whether the Fed hints at rate hikes or not.
Why this matters to a systematic investor
At Systems2follow, it’s all about systems with fixed rules rather than gut feelings. Some of those systems are directional; others are market-neutral. That’s no coincidence—it’s the essence of diversification.
By diversifying across different systems and different markets, you aren’t dependent on a single scenario. For example, in recent weeks, uncertainty surrounding U.S. interest rates was offset by a record-breaking run in Amsterdam. And while a directional system benefits from a clear trend, a market-neutral system can continue to perform steadily on a day when the market’s direction remains completely unclear until 8:00 p.m.
An interest rate decision is therefore no reason to change your approach. Rather, it illustrates why a well-thought-out mix exists: not to predict what the Fed will say tonight, but to ensure that you don’t have to predict it.
What’s the next step?
Curious about what a combination of directional and market-neutral systems might look like for your situation?
Click here to schedule a no-obligation consultation.
Investing involves risks. You may lose (part of) your investment. Systems2follow offers only software and a Trading API; we do not provide investment advice.
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