The S&P 500 (Index: SPX) experienced its second Lévy flight event of 2022, as investors suddenly shifted their forward-looking attention away from the near-term quarter of 2022-Q2 to instead focus on more distant future quarters.

Precisely which quarter that is has yet to be determined, but here's how it looks on the latest update to the dividend futures-based model's alternative futures spaghetti forecast chart, where the magnitude of the shift spans the redzone forecast, going from its lowest limit to its highest at this point of time.

The redzone forecast range identifies where the model would place the level of the S&P 500 after adjusting for the echo effect of the past volatility of historic stock prices, which provide the base reference points from which its projections of the potential futures for the index are made. It is also based on the assumption that investors would fix their focus on the upcoming future quarter of 2022-Q2 through the period it is shown. Stock prices moving outside that range would simply confirm that assumption from six weeks ago no longer holds.

Whenever investors reset how far they are looking into the future, we recognize that stock prices are undergoing a Lévy flight event. These events can be a significant contributor to the outsized changes that occur periodically in stock prices. Since investors have different expectations for the pace of dividend growth that will be realized at different points of time in the future, those differences create the different trajectories shown in the alternative futures chart with each shown trajectory associated with the expectations that apply at specific points of time in the future. How much stock prices change in in a Lévy flight event depends upon how different the expectations for dividends are at the point of time they had been focusing upon and the point of time to which they turn their attention.

2022's second Lévy flight event was triggered by the Federal Reserve's release of its latest "dot plot" communicating the Fed's minions' new expectations for how they will set the Federal Funds Rate over the next year. ZeroHedge describes how that new information impacts how far forward investors are looking in time (the following excerpt omits ZH's charts):

After some early volatility, when stocks moved with every fake news headline either out of the FT, Ukraine or Russia, traders put World War III on the backburner to read the FOMC statement and listen to Powell. Initially there were no surprises when the Fed announce a 25bps rate hike, just as expected, a move which is woefully behind the curve as the last time CPI was 7.9%, the Fed funds was 13%...

... but the Fed also boosted its dots so high it effectively confirmed what the market had been saying all along: the Fed now expects 6 more rate hikes in 2022, or one rate hike at every meeting!

Hilariously, seven hikes is precisely what the market had been saying all along. However, once the Fed confirmed that the market was right, guess what happened? Rate hike odds tumbled.

Why? Because with even the Fed now forecasting a big slowdown to growth coupled with a surge in inflation...

... the most likely outcome now is stagflation. This immediately manifested itself in a plunge in 30Y yields...

... as the entire yield curve pancaked...

... culminating with the 5s10s inverting, a clear sign that a recession - the same recession which the Fed hopes to induce to crush commodity demand - is now coming.

And while the 2s10s curve still has about 20bps before it too inverts and begins the countdown to the next recession...

... one look at the 3Y1Y - 1Y1Y OIS fwd shows that markets are now pricing in almost two rate cuts in the next 3 years...

... confirming that the Fed, which was trapped long before today's rate hike, will be forced to ease and/or resume QE in the not too distant future even as inflation continues to rage. Translation: policy error.

That's why we say we don't yet know to which future quarter they've shifted their attention. The anticipated timing of when the Fed might be forced to reverse its rate hike plans will be a recurring point of interest.

Dividend futures were stable throughout the week, where they have not yet begun changing with the anticipation of recessionary conditions. Since they would be expected to erode as such conditions develop, the higher trajectories associated with more distant future quarters in the alternative futures chart are unlikely to be sustained in the event of an earnings recession or full-fledged economic recession.

Regardless, another metric for investors to follow will be dividend cut annoucements, which also have the potential to re-shift how far investors are looking into the future when they are made in addition to directly changing the expectations for dividend growth. We could be in for a period of heightened volatility in stock prices as all these dynamics play out.

Here's our recap of the market-moving events of the week that was:

Monday, 14 March 2022

• Signs and portents for the U.S. economy:
• Oil falls on Ukraine peace hopes, U.S. Treasury yields rise
• U.S. consumers lift inflation, spending expectations, NY Fed survey finds
• New wave of inflation - and disruptions - hits U.S. factory floors
• Bigger trouble developing in China, Ukraine:
• Economic impact of China's COVID resurgence must be watched - statistics bureau
• Ukraine economy to contract sharply in 2022 due to war, IMF report says
• Bigger stimulus developing in Brazil, China:
• Brazil government readies $32 billion of economic stimulus -sources
• China will ensure stable economic operations this year, cabinet says
• Eurozone minions thinking about tightening spending policies, but prepared to keep them going:
• Euro zone to tighten fiscal policy in 2023, but ready to reverse amid Ukraine war
• Tech, growth stocks lead Wall Street to lower close as investors focus on interest rates

Tuesday, 15 March 2022

• Signs and portents for the U.S. economy:
• Inflation surge, war cloud Fed's interest rate trajectory
• Gasoline, food lift U.S. producer prices in February
• OPEC flags risk to oil demand outlook from Ukraine war, inflation
• First-time U.S. home buyers feeling 'defeated' by soaring prices, rising rates
• ECB minion says Eurozone growth is strong:
• Euro zone headed for robust growth despite Ukraine war: Lagarde
• Euro zone industry output flat in sluggish start to 2022
• Wall Street jumps as S&P snaps 3-day slump; Fed on tap

Wednesday, 16 March 2022

• Signs and portents for the U.S. economy:
• Petroleum, food lift U.S. import prices in February
• U.S. business inventories rise solidly, but pace is slowing
• U.S. retail sales slow, huge savings likely to provide a cushion against inflation
• Oil dips on Russia-Ukraine talks, U.S. inventory data
• Fed minions hike rates, say they'll keep raising them:
• Fed hikes interest rates, signals aggressive battle against inflation
• Fed Announces Hawkish 25bps Rate Hike, Signals Hikes At Every 2022 Meeting As Bullard Dissents
• Fed finally moves against inflation with rate hike
• U.S. Treasury yields push to new highs as Fed looks set to hike rates
• Bigger trouble developing in China, London Metals Exchange:
• COVID curbs bite at Chinese ports, threatening global supply chains
• Nickel market in disarray after chaotic London return
• Bigger stimulus developing in Japan:
• Japan PM Kishida signals new spending to soften fuel cost blow
• Japan Inc hikes pay by more than 2%, not enough for a big economic boost
• Bigger inflation developing in Japan, Canada, Russia:
• Japan consumers' inflation expectations hit record high in March - survey
• Canada's inflation rate surges to a fresh 30-year high
• Russian inflation accelerates to 12.5%, highest since 2015
• Wall Street closes higher after Fed hikes rates, signals more to come
• Stocks, Gold, Cryptos Soar As Fed Hawkish Surprise Triggers Inversion, Countdown To Policy Error And Next Recession

Thursday, 17 March 2022

• Signs and portents for the U.S. economy:
• Oil surges 8% amid warnings of Russian supply shortages
• Analysis-As liquidity evaporates, oil braces for whiplash volatility
• U.S. economy flexes muscle with jobless benefit rolls at 52-year low; factories humming
• U.S. housing starts rebound sharply in Feb; building permits fall
• BOJ minions think Japan inflation will undershoot their target, again:
• BOJ's Kuroda sees inflation remaining short of 2% target
• ECB minions all over the map:
• ECB has 'extra space' before first rate hike, Lagarde says
• Europe's green transition to persistently boost inflation, ECB's Schnabel says
• ECB expects core inflation to fade as energy prices level off: Lane
• Wall Street stocks, oil prices rise after aggressive Fed hike outlook

Friday, 18 March 2022

• Signs and portents for the U.S. economy:
• Oil settles up but posts second consecutive weekly decline
• U.S. home sales tumble; higher prices, mortgage rates eroding affordability
• Fed minions thinks Fed needs to be more aggressive to counter inflation, want to keep "balanced":
• Fed policymakers say dramatic rate hikes may be ahead
• Fed's Bullard, explaining dissent, says rates should top 3% this year
• Fed's Waller says series of half point rate increases may be needed at coming meetings - CNBC
• Fed may have to be more aggressive after hiking rates this year, Kashkari says
• Fed's rate path balances inflation fight and pandemic unknowns, Barkin says
• Bigger trouble, stimulus developing in China:
• China seen keeping lending benchmarks steady, cut expectations grow: Reuters poll
• JPM, Credit Suisse expect China COVID spike to have minimal impact on GDP
• China's land sales plunged in Jan-Feb though easing measures
• China Jan-Feb fiscal spending quickens in fight to support slowing economy
• BOJ minions keep stimulus rolling out:
• BOJ keeps huge stimulus, cautious tone as Ukraine crisis clouds outlook
• BOJ Governor Kuroda's comments at news conference
• Wall St closes higher after Biden-Xi talks end, oil steadies

The CME Group's FedWatch Tool projects the next quarter point rate hike in May 2022 (2022-Q2). It also projects it will be followed by a half-point rate hike in June 2022 (2022-Q2), then anticipates quarter point rate hikes at six-week intervals after each Federal Open Market Committee meeting through May 2023, with no other hikes for the rest of that year.

The Atlanta Fed's GDPNow tool's latest estimate of real GDP growth in 2022-Q1 has risen to 1.3%, boosted from last week's projection of 0.5% growth and converging toward the "Blue Chip Consensus" forecast.