The final week of September 2022 saw the S&P 500 continue the swoon that began on Tuesday, 13 September 2022. Measured from its closing value of 4,110.41 on Monday, 12 September 2022, the index has dropped by 524.79 points to end 2022-Q3 at 3,585.62. That level is now 25.2% below the S&P 500's all-time peak of 4,796.56 recorded on 3 January 2022.

Which is to say that it has only taken 14 trading days from when the August 2022 inflation report was released for the S&P 500 to rack up the equivalent of 43% of its total loss to date during 2022.

We've rolled the S&P 500 alternative futures chart forward to show 2022-Q4. In doing so, we've also included enough of September 2022 (2022-Q3) to show the aftermath of the regime change that took hold in the market after 12 September 2022.

In the previous edition of the S&P 500 chaos series, we were concerned the actual trajectory of the index was following the projected trajectory for investors focusing on 2023-Q2 too closely. That's because we're also in a period where the dividend futures-based model's projections of the potential futures for the index are being impacted by the echoes of the past volatility of stock prices. Since the model uses historic stock prices as the base reference points for its projections of the future, that echo effect means the model should be less accurate at this time.

This week's update confirms looks more like we would expect. We've added a redzone forecast showing where we would expect the actual trajectory of the S&P 500 to be outside that noise. We're showing the redzone forecast range as the typical plus-or-minus three percent we would expect in a typical market environment. Using it as a reference, we find the actual trajectory of index is tracking within a couple of percentage points below it.

The redzone forecast range represents what we would call the signal, it's where we would expect the index to be under ordinary conditions for investors. The gap between the actual trajectory and the redzone forecast range is what we would call noise. This difference represents the effects of speculation caused in part by the higher level of volatility unleashed in the new market regime.

We think investors are setting stock prices more negatively in the new market regime because of their developing expectations for how high the Federal Reserve will ultimately set interest rates. They are expected to peak in 2023-Q2, which is why that distant future quarter has become the primary focus for investors.

That's supported by the context provided by the market-moving headlines of the week that was. Here are the headlines we followed during the final trading week of September 2022.

Monday, 26 September 2022

• Signs and portents for the U.S. economy:
• Grim demand outlook pushes copper prices to 2-month low
• Explainer-How the Biden administration could restrict independent contracting
• Oil rises from 9-month low on U.S. Gulf supply cuts, softer dollar
• Fed minions claim they can avoid 'deep pain', see recession ahead from aggressive actions, say they're going along with their central bank friends:
• Fed can avoid 'deep pain' in inflation fight, Bostic says
• Fed's Collins says inflation fight to cost jobs, recession not inevitable
• Fed's Mester: with inflation high, better to act "aggressively"
• Fed doesn't set policy in global vacuum: Mester
• Bigger trouble developing in Japan, Eurozone:
• Japan's factory activity expands at slowest pace in 20 months - flash PMI
• German economy facing recession, Ifo surveys head says
• German business morale slumps as winter recession looms
• BOJ minions want yen to fall in orderly fashion:
• Japan won't intervene to defend 145 yen line-in-the-sand: ex-top FX diplomat
• Japan warns against speculative yen moves, markets wary of further intervention
• Bank of Canada minion wants more rate hikes:
• Bank of Canada must hike rates to tame inflation -BoC Governor
• Bank of Mexico expected to hike rates:
• Mexican central bank seen pushing key rate to record 9.25% - Reuters poll
• ECB minions thinking inflation, Eurozone economy will get worse:
• Euro zone inflation becoming increasingly broad, ECB's de Guindos says
• Banks in the euro zone will have to raise provisions to cope with economic slowdown
• Asked about Italy, ECB's Lagarde says she won't fix 'policy errors'
• Wall Street ends lower, Dow confirms bear market
• The Dow is in a bear market. What does that mean?

Tuesday, 27 September 2022

• Signs and portents for the U.S. economy:
• U.S. new home sales unexpectedly rise in August
• Oil rises 2% from multi-month lows on U.S. Gulf output cuts, supply outlook
• Fed minions attempt to call the top for rate hikes, blame housing for inflation, say they're just going along with their global central bank friends on going into recession:
• Fed's Evans sees interest rates peaking at 4.50-4.75%
• Fed's Harker says housing shortage a key inflation driver
• Bullard: Recession a risk, but more on a global than U.S. basis
• Bigger trouble developing in China, Eurozone:
• China's industrial profit declines accelerate as demand weakens
• EU sees sabotage of Nord Stream, warns against attacks on 'active infrastructure'
• Seismograph spiked twice on day of Baltic pipeline leaks - Germany's GFZ
• BOJ minions conducting special ops to keep never-ending stimulus alive:
• Battling market forces, BOJ conducts special operation to curb rising yields
• ECB minions notice Eurozone inflation is higher than they expected:
• ECB's Centeno sees higher inflation than expected and cycle of rate hikes continuing
• S&P 500 ends near two-year low as bear market deepens
• Wall Street keeps selling as world assets fail to recover

Wednesday, 28 September 2022

• Signs and portents for the U.S. economy:
• Oil prices jump after U.S. crude, fuel stocks drop, dollar weakens
• U.S. oil refinery run-rates could top 90% for 3rd quarter in a row
• U.S. mortgage interest rates jump to 6.52%, highest since mid-2008
• U.S. pending home sales post third straight monthly decline in August
• Fed minions starting to call the top for rate hikes, want to overhaul how they regulate bankers, want to slow down pace of rate hikes:
• Fed's Evans: expect to reach top Fed policy rate by March
• Fed's Evans: Market volatility can create restrictiveness
• Fed's Bowman calls for overhaul of approach to evaluating banking competition
• Fed's Bostic backs 75-basis-point hike in November, smaller rise in December
• Fed's Daly: do not want to tip economy into downturn
• Bigger stimulus developing in China:
• China's central bank launches $28 billion loan facility to support equipment upgrades
• Bank of England minions forced to abandon rate hikes as recession forces hand:
• Bank of England moves to calm bond market rout after tax cut storm
• UK gilt prices rocket after Bank of England steps into market
• Explainer-Why is Bank of England acting again? What next in the UK crisis?
• UK housing market may face perfect storm as mortgage rates rise, house prices drop
• ECB minions getting excited to deliver bigger rate hike in November:
• ECB policymakers put 75 bps hike on table for October
• ECB may need to lift rates by 75 basis points in Oct, Kazimir says
• ECB needs big Oct rate hike; should hit neutral rate this year, Rehn says
• Wall Street bounces off lows as UK steps in to calm bonds
• Apple falls on fears of slowing iPhone 14 demand

Thursday, 29 September 2022

• Signs and portents for the U.S. economy:
• U.S. economy shrank in the first half of 2022, updated GDP confirms - MarketWatch
• U.S. weekly jobless claims hit five-month low; economic picture darkening
• Oil settles lower after hitting $90/bbl as OPEC+ considers output cut
• Fed minions say all's well for U.S. economy:
• Fed's Mester: Doesn't see financial stability problems for US
• Mester: Fed will watch growth concerns after clear progress on inflation
• Fed's Daly: no U.S. recession needed to defeat high inflation
• Fed needs ways to adjust its balance sheet faster, says Daly
• Fed's Daly: 'Comfortable' with 4.5%-5% Fed policy rate in 2023
• St. Louis Fed president doesn’t see UK turmoil affecting US economy
• Bigger trouble developing in China, Eurozone:
• China's Sept factory activity set for third straight monthly contraction - Reuters poll
• China's yuan unlikely to continue rapid depreciation -state media
• Euro zone economic sentiment falls sharply as inflation expectations rise
• World Bank's Malpass sees risk of stagflation, likely recession in Europe
• German economic institutes see 2023 contraction as gas crisis hits
• German inflation at highest level in over 25 years
• Bigger stimulus, currency rescue developing in China:
• China's central bank to step up efforts to support economic recovery
• China's smaller banks cut deposit rates to ease margin pressure
• China to relax floor on mortgage rates to revive housing sector
• Exclusive-China's state banks told to stock up for yuan intervention-sources
• ECB minions thinking mostly about hiking rates, want debtor EU countries to suffer:
• ECB eyes jumbo rate hike to fight inflation even as debtors suffer
• ECB should focus on rate policy over balance sheet cut, Centeno says
• ECB's Rehn warns against excessive energy expenditure
• ECB policymakers see no need to aid Italy with new scheme: sources
• Wall Street ends down sharply; investors fret over economy
• 'Pick-your-poison': Wall Street sell-off resumes

Friday, 30 September 2022

• Signs and portents for the U.S. economy:
• Oil falls but notches weekly gain as OPEC+ considers output cut
• OPEC+ oil output cut talks narrow to 0.5-1.0 million bpd, sources say
• OPEC oil output in Sept hits highest since 2020 - survey
• U.S. oil & gas rig quarterly growth slowest in two years -Baker Hughes
• U.S. consumer spending rebounds, but high inflation cooling demand
• U.S. consumers spurn cars, couches and cruises, results show
• Chicago PMI Plunges Into 'Contraction' - Weakest Since June 2020
• Fed minion says screw any sign of a slowing economy, crank up rates MOAR!
• U.S. Core PCE rise keeps aggressive Fed scenario in place
• Fed's Brainard warns against premature rate cuts in face of high inflation
• Barkin: Risk of inflation 'festering' worse than of Fed overdoing rate increases
• Bigger trouble developing in China, Japan:
• China's factory, services surveys suggest economy struggling to rebound
• Japan warns market fluctuations could impact economy
• Bigger stimulus developing in China:
• China to cut provident fund loan interest rate for first-time home buyers
• BOJ minions to price the cost of currency bailout, Japanese government to boost stimulus:
• Japan to confirm size of yen-buying intervention, eyes on size of war-chest
• Japan spent record of nearly $20.0 billion on intervention to support the yen
• Japan's factories ramp up output in Aug, govt eyes fresh stimulus boost
• ECB minions under pressure from double-digit Eurozone inflation:
• Euro zone inflation hits record high 10%, raising pressure on ECB
• Wall St posts third straight quarterly loss as inflation weighs, recession looms
• Carnival Shares Crash As Cruise Rebound Sinks
• Rent-A-Center stock slumps 17% after hours on guidance cut amid macro headwinds
• Nike Stock Tumbles After Warning on Profit Margin Hit From Inventory Bloat

The CME Group's FedWatch Tool still projects a three-quarter point rate hike in early November followed by a half point rate hike in December (2022-Q4). In 2023, investors anticipate a quarter point rate hike in March (2023-Q1), setting to top for the Federal Funds Rate's target range at 4.75-5.00%. After that peak, the FedWatch tool indicates the Fed will be forced to swing into reverse, with a quarter point rate cut projected as early as May 2023 (2023-Q2).

The Atlanta Fed's GDPNow tool's projection for real GDP growth in the just-ended calendar quarter of 2022-Q3 rocketed up from +0.3% to +2.4% based on new data pointing to higher consumer spending and more private investment. The Bureau of Economic Analysis will provide its first official estimate of real GDP growth in 2022-Q3 at the end of October 2022.

Looking backward, the BEA's annual GDP revision confirmed the U.S. economy experienced a technical recession in the first two quarters of 2022 with two consecutive quarters of negative real growth.