Unexpectedly Intriguing!
14 March 2022

Although the U.S. economy got a positive boost as crude oil prices dropped, the S&P 500 (Index: SPX) continues its downward descent as economic reports confirmed President Biden's inflation reached a new high in February 2022.

The index received a brief pop from the unexpected relief in crude oil prices, which backed down from the $130 level they hit after Russia's invasion of Ukraine, but that geopolitical event is only contributing noise to the outlook for U.S. businesses. The highest inflation in 40 years, which will compel the Federal Reserve to hike short term interest rates, had a more negative effect for the S&P 500, as stock prices continued their downward descent on that news. The latest update to the alternative futures chart shows the actual trajectory of the index is still consistent with the redzone forecast range's projection, though the noise from the Ukraine invasion's geopolitics is pulling the level of the S&P 500 to the lower end of the forecast range.

Alternative Futures - S&P 500 - 2022Q1 - Standard Model (m=-2.5 from 16 June 2021) - Snapshot on 11 Mar 2022

Since it occurred so late in the month, the February 2022 Consumer Price Index report showed only minimal impact from Russia's 24 February 2022 invasion of Ukraine. The index is based on the prices of some 80,000 items the Bureau of Labor Statistics surveys throughout the entire month, so it predominantly reflects price increases that had not yet been affected by the Ukraine crisis. We anticipate the upcoming report for March 2022 will show more of the invasion's impact on oil, food, and commodity prices, which will come on top of the now well-established inflationary forces enabled by the Biden administration's policies.

Here's our summary of the past week's market moving news headlines:

Monday, 7 March 2022
Tuesday, 8 March 2022
Wednesday, 9 March 2022
Thursday, 10 March 2022
Friday, 11 March 2022

The CME Group's FedWatch Tool projects quarter point rate hikes in March (2022-Q1) and May (2022-Q2), to be followed by a half-point rate hike in June (2022-Q2). The FedWatch tool then anticipates quarter point rate hikes resuming in July (2022-Q3), November (2022-Q4) and December (2022-Q4) to round out 2022.

The Atlanta Fed's GDPNow tool's latest estimate of real GDP growth in 2022-Q1 is 0.5%, boosted from last week's projection of zero growth with higher than previously expected estimates of personal consumption expenditures, particularly for durable goods, as American consumers may be trying to get ahead of anticipated price hikes.

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