The S&P 500 (Index: SPX) had a rough week just ahead of the Christmas and New Years holidays.

The rough going was courtesy of the grinches at the Federal Reserve, who did their best to steal Christmas from investors by putting the kibosh on the prospects for more than two interest rate cuts in 2025. Since we covered the immediate aftermath of their Scrooge-like pronouncements, all that's left to cover is what happened after that.

What happened after the Fed's final announcement of 2024 is the S&P 500 managed to recover one of the three percent it lost on Wednesday, 18 December 2024. The index closed at 5,930.87, down two percent from where it ended the preceding week.

After the Fed reduced the Federal Funds Rate by a quarter point to a target range of 4.25-4.50% and signaled they weren't planning more than two rate cuts in 2025, the CME Group's FedWatch Tool dropped all but one rate cut from its forecast for all of 2025. The remaining projected rate cut is a 0.25% reduction in the Federal Funds Rate on 7 May (2025-Q2).

Not uncoincidentally, that's the future quarter upon which investors are focusing their attention. The latest update shows the late week rebound in stock prices that falls within the range associated with 2025-Q2 that the dividend futures-based model has been projecting for the index.

Here is the full trading week's worth of market moving headlines:

Monday, 16 December 2024

• Signs and portents for the U.S. economy:
• Oil prices drop on soft Chinese spending data
• US factory activity slumps further in December as tariffs loom
• US manufacturers predict growth in 2025 after prolonged slump
• Fed minions get some better economic data:
• Fed sees a glimmer that recent US productivity gains may last
• Mixed economic signs developing in China:
• China's weak consumption drags on economy as Trump tariff threat looms
• China's consumption recovery continues despite growth slows, stats bureau says
• China November industrial output rises 5.4%, above expectations
• China sees slowest home price decline in 17 months amid signs of stabilisation
• China's property investment falls 10.4% y/y in Jan-Nov
• Bigger trouble developing in Japan, some hope on horizon:
• Japan's factory activity softens for 6th straight month, PMI shows
• Japan October machinery orders rise on strong manufacturing sector
• Bigger trouble developing in Eurozone less bad, Germany is worse:
• Decline in euro zone business activity eases in December, PMI shows
• German business activity ends year in contraction territory, PMI shows
• ECB minions thinking they should probably keep cutting Eurozone interest rates:
• ECB should keep cutting rates in small steps, Kazimir says
• ECB expects more rate cuts as inflation fears abate
• Nasdaq logs record close, S&P up as Wall Street looks for final 2024 rate cut; Dow down
• Bitcoin rallies past $107,000, hopes grow for strategic reserve
• Explainer: How would a U.S. bitcoin strategic reserve work?
• US bond investors brace for 'hawkish cut,' spurn long-term bonds

Tuesday, 17 December 2024

• Signs and portents for the U.S. economy:
• Oil prices in holding pattern ahead of Federal Reserve decision
• Half US at high risk of power shortfall in next decade, regulator says
• US manufacturing output rebounds less than expected in November
• Fed caution, inflation risks propel US Treasury yield forecasts higher again
• Bigger trouble, stimulus developing in China:
• China capital markets witness record outflows in Nov, official data shows
• Exclusive: China plans record budget deficit of 4% of GDP in 2025, say sources
• BOJ minions expected to boldly do nothing with Japan's interest rates:
• Over 90% of market players expect BOJ to keep rates steady this week, survey shows
• ECB minion say they'll make Eurozone monetary policy up as they go:
• ECB's Rehn says speed, scale of rate cuts to be decided at each meeting
• S&P, Nasdaq fall, Dow marks longest losing run since 1978 before Fed's last 2024 meeting
• Stocks fall, Dow drops for 9th straight session with Fed decision due

Wednesday, 18 December 2024

• Signs and portents for the U.S. economy:
• US single-family housing starts rebound; tariffs an obstacle
• US current account deficit hits record high in the third quarter
• Oil settles up after US crude stocks fall, Fed's 2025 outlook curbs gains
• Fed minions cut rates, dial back plans for more rate cuts because of persistent Bidenflation:
• Fed lowers rates but sees fewer cuts next year due to stubbornly high inflation
• Fed lowers rates but projects slower pace of further cuts, firmer inflation
• Fed cuts reverse repo rate by wider margin than funds rate target
• Fed policymakers project two quarter-point rate cuts next year
• US rate futures price in Fed on hold in January, less than two cuts in 2025
• VIEW Fed cuts rates 25 bp, scales back 2025 easing projections
• BOJ minions seek answers to philosophical questions:
• BOJ's rate hike debate shifts from 'when?' to 'how high?'
• Nasdaq slides more than 2%, yields jump as Fed sees fewer rate cuts, stresses caution
• Stocks decline after Fed cuts rates as expected
• US10Y hits 4.50%, US2Y spikes 10 bps after Fed projects fewer rate cuts in 2025

Thursday, 19 December 2024

• Signs and portents for the U.S. economy:
• Oil drops as dour economic outlook adds to oversupply concerns
• Philly Fed's manufacturing gauge slumps to 20-month low
• US existing home sales jump to eight-month high in November
• US mortgage rates rise after three straight weekly declines
• Seeing low-income consumers squeezed, retailers target $10 and under gifts
• Fed minions causing problems elsewhere in the world:
• Fed's hawkish tilt has emerging markets scurrying to save currencies
• More hawkish Fed policy committee may increase dissent in 2025
• Central banks taking other actions, or not, with their interest rates:
• Bank of England keeps rates steady, policy split widens
• BOJ keeps ultra-low rates, gives few clues on when it might hike
• BOJ Governor Ueda's comments at news conference
• BOJ keeps rates steady by 8-1 vote, board member Tamura dissents
• New Zealand sinks into recession, more rate cuts coming
• ECB minions claim they don't need to stimulate Eurozone economy:
• No need for ECB to start stimulating growth, Patsalides says
• Wall Street rebound fizzles out, but Dow snaps longest losing streak since 1974

Friday, 20 December 2024

• Signs and portents for the U.S. economy:
• Fed's Favored Inflation Gauge Brings Some Good News
• Bird flu drives US egg prices to all-time highs before Christmas
• Oil falls 1% on demand growth concerns, robust dollar
• Fed minions try to explain why they've gone cold toward rate cuts in 2025:
• Fed policymakers prepare the ground for rate-cut pause next year
• Fed's Williams says Fed remains on track for cuts, amid uncertain outlook
• Fed's Goolsbee says policy uncertainty led to his shift on rate-cut path
• Fed's Hammack says economic strength argued against rate cut
• BOJ minions sad they can't keep never-ending stimulus alive:
• Bank of Japan bids final farewell to Kuroda's radical policy experiment
• Japan's core inflation accelerates, keeps BOJ rate-hike chance alive
• Stocks rally after inflation data but close lower for the week
• Soft inflation data helps Wall Street end an otherwise tough week on a positive note

The Atlanta Fed's GDPNow tool's projection of the real GDP growth rate for the current quarter of 2024-Q3 declined to +3.1% from the previous week's +3.3% annualized growth estimate.

Looking ahead, the next weeks should be relatively quiet in terms of market moving news for the markets, which will hopefully provide the conditions needed to deliver a traditional Santa Claus rally. We'll pick up the plot in the new year with the first 2025 edition of the S&P 500 chaos series on Monday, 6 January 2025.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Federal Reserve official dressed as the Grinch who is trying to steal Christmas"

Christmas will soon be here, you still need to shop for gifts, and your time is running out.

Millions of people face this situation every year. It most often arises because of a classic knowledge problem. You don't know what to get for the people for whom you are shopping. If you did, you would probably already be done with all your shopping at this point of time.

You could perhaps solve this problem a very traditional way, say by giving a classic fruitcake to all the people you have left to shop for on your Christmas shopping list. And depending upon how they feel about receiving a fruitcake, that may help you with the problem of shopping for them next year, especially if they don't like your gift of fruitcake and that leads to them falling out with you.

But odds are that if you're shopping for gifts for them, it's probably because you like them, so why would you even risk that? You need a better solution. So let's turn to statistics.

Or more precisely, let's turn to the results of a poll of Americans run by Statista on what kinds of items are most frequently found on people's wish lists for the gifts they will receive at Christmas. The following interactive chart shows the percentage of Americans whose gift lists included items that fell into the indicated categories.

Knowing the probability the people on your Xmas shopping list will want something that falls in the most popular categories can help you finish up your shopping this year now that there's so little time left. And to help get you over the finish line for this year's gift shopping, we've asked the Inventions in Everything team to supply suggestions of gifts that go along with many of these categories.

Last Minute Xmas Gift Ideas

When the IIE team goes shopping, its normally to find out if its even possible to buy a product based on wild or wacky patented invention we've featured. Or, in the case of the "Outside the Box Thinking" category, we review unusual innovations that do exist and that you can buy. The six items on the IIE team's last minute Xmas list for 2024 falls somewhere between these two categories. Here they are.

Bilz Money Puzzle for Cash, Gift Cards and Tickets

Money and gift cards top the list for gifts Americans say they would prefer to receive in 2024 with more than half of those surveyed saying they want to get these things for Christmas. These are really easy things to get, so giving them as gifts is more about how you package them. That's where the Bilz Money Puzzle for Cash, Gift Cards and Tickets comes into play.

Put the cash or gift card into the puzzle box and your gift recipient can enjoy the challenge of extracting your gift from it. Or should we say that your gift recipient can "enjoy" the challenge of extracting your gift from it. We trust that since you know them, you know what you can get away with. As a plus, because the money puzzle can also hold things like movie or concert tickets, you can also tick the box for the Entertainment/media category with this item.

Moipejo LED Flashlight Gloves

Over a third of Americans say they would like to receive some kind of apparel for Christmas this year, so why not light up their faces by giving them gloves with built in LED lights?

It occurs to us this product might also tick the boxes for Jewelry, which nearly one out of five Americans would like to receive at Christmas. It also ticks the box for Electronics and appliances, which 15% of Americans hope to get in 2024.

The Flying Orb Ball Hover Toy

Speaking of electronics and appliances, which 18% of Americans say they'd like to receive, why not get them a flying ball they can play catch with themselves with?

This is a unique product the IIE team covered earlier this year. It's fundamentally a lightweight miniature drone mounted inside a ball-shaped frame that allows air to pass through so the drone's rotors can work, making it possible for the 'ball' to fly on its own.

Combined with a bit of programming magic, it becomes a ball that lets you play catch with yourself. The concept of Flying Orb Ball Hover Toy, a.k.a. "the boomerang ball" is demonstrated in the following short video:

Versions of this technological wonder are available at retailers like Amazon and Walmart. And like many modern tech-based toys, it has a rechargeable battery.

Funboy Winter Fun Inflatable Toboggan

As long as we're talking about products that are fun, we have to include the inflatable toboggan. Unlike the Flying Orb, it's low tech and it checks the box for Games.

For obvious reasons, this gift is best given to those who live in areas that get snow and that ideally also has hills. Otherwise, you may need to pair this item with Travel, which nearly 19% of Americans say they would like to get for Christmas this year. If you don't, there's nothing stopping your gift recipient from blowing it up anyway and using it as a cushion or pillow, which means it might work for them as Décor. Or not.

Original SipCaddy Shower Wine Holder

We think this item falls into the Personal care products category, but really, it's for that person you know who likes to drink adult beverages and who also likes to bathe or shower.

In truth, this gift is for that special someone who likes these activities so much they want to do them both at the same time. Again, you know who you would give this gift. If you didn't, you might be better off giving them that fruitcake.

Pulidicki Car Cleaning Gel

This last minute gift idea is a total stretch on our part. We looked at the remaining categories we hadn't already covered and tried to identify one product that could tick the boxes on as many of those as we could. This miracle product was the winner.

Pulidicki Car Cleaning Gel is a sticky gel that you can use to remove dirt from the nooks and crannies of your car while you detail it, which clearly falls in the Automotive category. You can also use the gel to clean the gunk off the keyboard for your Computer and hardware, and also your electronics and appliances. Or for that matter, around your light switch plates and baseboards of your home, which makes it a Home improvement product. If their hobby is cleaning, it would count as Hobby supplies.

There you have it. Six last minute gift ideas, links to where you can buy them, and just enough time to order them to get them before December 25 arrives. What can possibly go wrong? Happy Xmas!

Image credit: Cake Decorator Displaying Deluxe Fruitcake on Baking Line photo by JmanningCSB on Wikimedia Commons. Creative Commons CC BY-SA 4.0 Attribution Share-Alike 4.0 International Deed.

It has been over a month since our first look at the expected future quarterly dividends of the S&P 500 (Index: SPX) in 2025. A lot of things have happened since then, most notably the Federal Reserve acted to cut the Federal Funds Rate by a quarter point on 18 December 2024, as was widely expected.

But the Fed also clearly signaled they were looking at proceeding with fewer rate cuts in 2025 than investors expected a month earlier, which was not as widely expected. The S&P 500 fell nearly three percent below the previous day's close as investors absorbed that information, with all of the decline taking place after the Fed's action.

Our latest snapshot for the future of the S&P 500's dividends was snapped on the morning of Wednesday, 18 December 2024, ahead of the Fed's interest rate announcements. Compared to what investors expected a month ago, the outlook for dividends through the next year has dimmed, in part because the prospects for continued interest rate cuts in 2025 has been dimming. The following animated chart shows how the expectations for dividends changed in the month from the morning of 15 November 2024 to the morning of 18 December 2024. If you're reading this article on a site that republishes our RSS news feed, you may need to click through to our site to see the animation.

The 18 December 2025 snapshot of the S&P 500's quarterly dividend futures represents the "before" picture of the outlook for the index' expected dividend payouts in 2025. We'll follow up next year with a snapshot of the outlook for dividends "after" the Fed's action.

Going back to the reaction of investors to the Fed's announcements, we've animated the alternative futures chart for 2024-Q4 that we've been featuring in our regular S&P 500 chaos series. Here, this animated chart shows the changes in the S&P 500 between our most recent snapshot taken on Friday, 13 December 2024 to where the index closed on Wednesday, 18 December 2024:

The trajectory of the S&P 500 over the last few days suggests investors briefly shifted their focus to the more distant quarter of 2025-Q3, coinciding with the expected timing of the Fed's second rate cut in 2025, before turning their full attention back to 2025-Q2 in setting current day stock prices after the Fed's announcement, where whether or not rate cut will take place in this quarter has been at issue in recent weeks.

Given the Federal Reserve's influence over future expectations of interest rate changes, we use the Fed's regularly scheduled announcements of its interest rate policies as calibration points for the dividend futures-based model. The next calibration exercise will be on 29 January 2025.

In November 2024, the number and percentage of younger teens with jobs in the U.S. fell to its lowest level since March 2021.

The number of U.S. teens Age 16 and 17 with jobs in the U.S. workforce declined to a seasonally-adjusted 1,927,000 in November 2024, some 280,000 below the 2,207,000 young teens recorded with jobs six months earlier. Going back to January 2024, the number of Americans Age 16-17 with jobs has fallen by 365,000.

In percentage terms, from January 2024 to November 2024, the share of the Age 16-17 population in the U.S. with jobs has fallen from 24.6% to 20.7%. The U.S. economy has gone from providing work for one in every four young teens to providing jobs for a little over one in every five young teens.

The following pair of charts shows the trends for the seasonally-adjusted teen employment and the teen employment-to-population figures from January 2016 through November 2024.

These charts show that in the last few months, the number of older teens, Americans Age 18 to 19, have seen their seasonally adjusted numbers in the U.S. workforce increase. That raises a good question - are younger teens simply aging into this older demographic?

That's certainly happening, but focusing on that dynamic misses a big underlying change in the composition of the teen workforce. Younger teens with jobs who are aging out of the Age 16-17 group are not being replaced in the ranks of the employed by younger Americans who are aging into the Age 16-17 group. An increasing share of those newer teens joining the population of working age Americans have not been getting hired in 2024.

Since January 2024, the seasonally adjusted number of young teens with jobs has dropped by 16%. What do you call it when such a large percentage of a population finds itself without a money-paying job?

References

U.S. Bureau of Labor Statistics. Labor Force Statistics (Current Population Survey - CPS). [Online Database]. Accessed: 6 December 2024.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a store sign that says 'NOW HIRING' and 'AGE 18+ ONLY'".

The probability a U.S. recession will someday be determined to have begun between December 2024 and December 2025 has dropped below 50%.

This assessment is based on the yield curve-based recession forecasting model developed by Jonathan Wright in 2006. Going by this model, the odds of a U.S. recession in the next year dropped below the 50% threshold on 1 December 2024.

The main factor lowering the probability of a recession beginning in this period is the Federal Reserve's interest rate rates during 2024. The Fed's reductions to the Federal Funds Rate has released some of the building recessionary pressure from the Fed having boosted short term interest rates in 2022 and 2023 to combat the Biden-Harris administration's inflation.

With the Federal Funds Rate being reduced, the yields of short-term U.S. Treasuries have followed, further reducing the recession start probability. The following chart tracking the probability of recession since 30 April 1983, the period from July 2024 through mid-September 2025 represents the most likely period in which the NBER will say the U.S. economy peaked before beginning a period of contraction.

The current probability of a recession being officially determined to have begun between 1 November 2024 and 16 December 2025 is 42.9%. The featured chart shows that probability 'pushed out' to the end of the period for which the recession forecast applies.

And now that the Federal Funds Rate is not being held at a fixed level for a sustained period of time, we can resume updating the Recession Probability Track, which provides additional information about the factors that influence Wright's recession forecasting model.

With the Fed set to reduce the Federal Funds Rate by another quarter point on 18 December 2024, we anticipate the Recession Probability Track will continue its downward trajectory in the weeks ahead.

Analyst's Notes

As mentioned, the recession probability presented here is based on the Federal Reserve Board's yield curve-based recession forecasting model, which factors in the one-quarter average spread between the 10-year and 3-month constant maturity U.S. Treasuries and the corresponding one-quarter average level of the Federal Funds Rate. If you'd like to do that math using the latest data available to anticipate where the Recession Probability Track is heading, we have provided a tool to make it easy to do.

We will continue following the Federal Reserve's Open Market Committee's meeting schedule in providing updates for the Recession Probability Track until the U.S. Treasury yield curve is no longer inverted and the future recession odds retreat below a 20% threshold. We're following how this forecasting method performs and we anticipate this level may be reached in mid-2025.

Previously on Political Calculations

We started this new recession watch series on 18 October 2022, coinciding with the inversion of the 10-Year and 3-Month constant maturity U.S. Treasuries. Here are all the posts-to-date on that topic in reverse chronological order, including this one....

• U.S. Recession Probability Drops Below 50%
• U.S. Recession Odds Fall with Fed Rate Cut, But Are Still Elevated
• Triple Top Pattern Locking In for U.S. Recession Probability
• Triple Top Developing for U.S. Recession Probability
• U.S. Probability of Recession in Next Twelve Months Hovers Near 70%
• Recession Probability Falls After Hitting Double-Top
• U.S. Recession Probability Nears a Double-Top
• Probability of U.S. Recession Resurges to Nearly 75%
• U.S. Recession Odds Recede to Two Out of Three Chance in 2024
• U.S. Recession Probability Continues Receding on All Hallow's Eve
• U.S. Recession Probability Starts to Recede
• Probability of Recession Starting in Next 12 Months Breaches 80%
• U.S. Recession Probability on Track to Rise Past 80%
• U.S. Recession Probability Reaches 67%
• U.S. Recession Probability Shoots Over 50% on Way to 60%
• Recession Probability Nearing 50%
• Recession Probability Ratchets Up to Better Than 1-in-6
• U.S. Recession Odds Rise Above 1-in-10
• The Return of the Recession Probability Track

Image Credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Federal Reserve official who is trying to use a crystal ball to tell the future".