After starting at its all time record high, the S&P 500 (Index: SPX) dropped into bear territory in 2022, spending much of the time during the year bouncing around the 20% decline threshold that defines bear territory. The last two weeks of the year were no different, with the index closing out 2022 right at the bear territory threshold.

The final update to the alternative futures chart for 2022-Q4 shows the index experienced one more Lévy flight event in 2022, with investors shifting their forward looking focus from 2023-Q1 outward to the more distant future quarter of 2023-Q2.

Given the closeness of the dividend futures-based model's projections for 2023-Q2, 2023-Q3, and 2023-Q4, it's possible investors have shifted their attention to more distant future quarters. But with the actual trajectory of the S&P 500 still within the range of values we would expect it to be for investors focusing on 2023-Q2, we cannot yet rule that possibility out.

Not that it would take long to get that picture sorted out. The market moving headlines of the last two weeks point to the expected timing of the peak of the Fed's series of rate hikes (2023-Q2) and the increasingly expected arrival of recession in the second half of 2023 as the factors that will set how far forward in time investors set their time horizons. Here are the headlines:

Monday, 19 December 2022

• Signs and portents for the U.S. economy:
• Oil rises on hopes for China's economy; recession fears limit gains
• U.S. home builder gloom persists, but some hope seen for next year
• Fed minions trying to sell "recessionish" as a real adjective:
• Recession, or recession-ish? Fed outlook for U.S. walks a fine line
• Bigger trouble developing in Asia, Australia, Africa:
• Chinese business confidence falls to lowest in almost a decade on COVID
• China's COVID surge hits Beijing trading floors, Shanghai finance hub
• China Nov aluminium imports fall amid rising domestic supply
• Taiwan's export orders seen contracting at faster pace in Nov- Reuters poll
• South Korea flags economic slump deepening for while
• Australia's housing crisis, largely hidden, is getting worse
• Ghana to default on most of external debt as economic crisis worsens
• BOJ minions may be forced to end never-ending stimulus:
• BOJ may unwind ultra-easy policy in 2023, nearly half of economists say: Reuters poll
• Japan to consider revising Abe-era deflation fighting mandate - sources
• Ex-BOJ Nakaso sees Japan lagging in exiting stimulus due to weak economy, wages
• ECB minions worried ECB may lose more credibility:
• ECB's de Guindos says changing inflation goal will hurt credibility
• ECB's strong policy response needed for next half year, Kazimir says
• ECB's Nagel pleads with Germans for patience in combating inflation
• Wall St posts fourth straight drop, Treasury yields rise as recession fears weigh

Tuesday, 20 December 2022

• Signs and portents for the U.S. economy:
• Oil prices settle higher on weak dollar, worries U.S. winter storm could cut travel
• Private debt markets face reality check as companies grapple with rising rates, recession
• Higher mortgage rates depress U.S. single-family housing starts, building permits
• U.S. feeling impact of China COVID changes, can 'power through it' -Treasury's Adeyemo says
• Fed minions say consumer cost of renting is rising more slowly:
• New Cleveland Fed data points to easing shelter inflation outlook
• Better than expected economic news in the Eurozone:
• German producer prices rise less than expected in November
• Sentiment among German exporters brightens for third month in a row - Ifo
• There should not be any 'crash' in French and European economy - ECB's Villeroy
• Bigger trouble developing in China:
• World Bank cuts China growth outlook on COVID, property woes
• Taiwan Nov export orders plunge, China's COVID surge clouds outlook
• BOJ minions dial back a small portion of never-ending stimulus:
• BOJ jolts markets in surprise change to yield curve policy
• Instant View: Bank of Japan makes surprise policy tweak
• Yen soars to 4-month peak after surprise BOJ policy tweak
• Analysis-Bank of Japan gives an inch, investors ready to claim a mile
• Marketmind: Asia reels from BOJ shock
• Wall St closes slightly higher after four-day sell off

Wednesday, 21 December 2022

• Signs and portents for the U.S. economy:
• U.S. consumer confidence rebounds; existing home sales sink
• U.S. existing home sales fall for 10th straight month in November
• Oil prices rise over $2 on drawdown in U.S. crude stocks
• U.S. new vehicle sales to fall in December as high prices deter buyers - report
• Bigger trouble developing in China:
• Corporate China struggles with supply snags, demand slump as COVID cases spread
• BOJ minions "shock" move may signal beginning of end of never-ending stimulus:
• Analysis-Kuroda's abrupt policy tweak opens door for bigger shift next year
• Analysis-Japanese insurers likely to provide tailwind to yen as BOJ shifts
• Wall Street advances with help from Nike, FedEx and consumer sentiment
• FedEx promises more aggressive cost cuts; shares rise
• Nike shares surge as inventory challenges start to abate, demand stays strong
• Weary Wall Street cheers improved consumer confidence

Thursday, 22 December 2022

• Signs and portents for the U.S. economy:
• Oil falls by $1/bbl as rate hike fears outweigh tighter U.S. stockpiles
• Low weekly jobless claims underscore U.S. labor market tightness; Q3 growth revised up
• The whack-a-mole economy: U.S. manufacturers struggle with unpredictable supplies
• Factbox: Corporate America lays off thousands as recession worries mount
• Micron Joins Intel, Other Chipmakers to Lay Off Thousands of Workers Despite Billions in Federal Subsidies
• Fed minions shocked at inflated jobs data, aren't expected to shrink balance sheet for long:
• Missing jobs mystery puts Fed on back foot
• Analysis-Fed's balance sheet drawdown could sunset next year
• Bigger trouble developing in the Eurozone:
• Sweden faces recession lasting into 2024, finance minister says
• French inflation will be high in coming months before easing in mid-2023 -Le Maire
• Analysis-Euro zone governments must court private buyers for mountain of debt
• ECB minions thinking about keeping rate hikes going:
• ECB's might raise interest rates at current pace for a while - ECB's de Guindos
• Wall Street tumbles on rate, recession worries, bleak chipmaker outlook
• Micron sets 10% job cuts in 2023 due to 'supply-demand mismatch'
• Nvidia, AMD, and Lam Research Slide After Micron Disappoints

Friday, 23 December 2022

• Signs and portents for the U.S. economy:
• Oil rises $3/bbl after Russia signals output cut due to price cap
• IRS delays $600 income reporting rule for U.S. gig workers
• U.S. consumer spending, inflation rise moderately amid rate hikes
• U.S. consumers' 1-year inflation outlook drops to 18-month low - UMich
• U.S. new home sales increase again in November
• Bigger stimulus developing in China:
• China cbank makes biggest weekly cash injection in two months
• Central bank minions give each other high fives all around:
• Global central banks deliver historic rate hike blast in 2022
• Fiscal stimulus rolling out in Japan as factories slow and inflation hits 40-year high:
• Japan unveils record budget in boost to military spending
• Japan Nov factory output likely down for 3rd month on global demand woes- Reuters poll
• Japan's consumer inflation hits fresh 40-year high, eyes on BOJ policy
• Wall Street ends up as investors eye data for rate prospects, energy outperforms

Tuesday, 27 December 2022

• Signs and portents for the U.S. economy:
• Oil steady as U.S. output ramps up after freeze, China eases COVID curbs
• Double-digit U.S. home price growth streak skids to an end
• Bigger trouble, stimulus developing in China:
• China's industrial profits slump on COVID fallout, next year seen improving
• China to step up financial support to COVID-hit catering, tourism sectors
• Smaller trouble developing in the Eurozone:
• German businesses expect only mild recession as disruptions ease
• Nearly three in five German industry associations foresee gloomy 2023
• S&P 500, Nasdaq close lower, weighed by growth stocks
• Tesla, megacap growth stocks pull Nasdaq lower; Dow rises

Wednesday, 28 December 2022

• Signs and portents for the U.S. economy:
• Oil settles lower in light trading on China demand concerns
• U.S. pending home sales sag more than expected in November
• Bigger trouble developing in Japan, BOJ minions debating what they'll do in 2023, JapanGov minion wants higher wages to keep up with inflation:
• Japan Nov factory output falls on weakening global demand
• BOJ debated rising wages, fading deflation risks at Dec meeting
• Japan's Nakao sees smoother path for Kuroda's successor with BOJ policy shift
• Ex-BOJ deputy Yamaguchi emerging as next central bank head contender -Sankei
• Japan to make raising wages a top priority, says senior govt official
• Bigger trouble still developing in China:
• South Korea Dec exports to fall for third month as China demand still weak- Reuters poll
• U.S. stocks end lower on mixed economic data, recession fears
• Wall St reverses gains as energy, growth shares drag
• Five days that killed the year': These trading sessions accounted for 95% of the S&P 500's losses in 2022

Thursday, 29 December 2022

• Signs and portents for the U.S. economy:
• Oil weakens on China uncertainty, U.S. demand keeps losses in check
• U.S. weekly jobless claims ticked higher last week
• Bigger stimulus developing in China:
• China's overnight repo rate falls to new low
• China to adjust trade tariffs on some goods from Jan 1
• Analysis-China's services sector eyes recovery after reopening, but challenges loom
• Bigger trouble developing in the Eurozone:
• Euro zone business lending growth slows sharply in November
• Wall Street surges in dip-buying rally, oil falls

Friday, 30 December 2022

• Signs and portents for the U.S. economy:
• Oil ends year of wild price swings with 2nd straight annual gain
• Fed minions see U.S. recession ahead:
• New Fed research flags rising risk of U.S. recession
• Bigger trouble, stimulus developing in China:
• China's factory activity likely cooled in Dec on COVID surge: Reuters Poll
• China central bank promises more policy support for economy
• China central bank makes biggest weekly short-term cash injection since 2019
• Bigger trouble expected to keep hanging around the Eurozone:
• High inflation here to stay for coming months, says German industry
• Stocks fall to end Wall Street's worst year since 2008, S&P 500 finishes 2022 down nearly 20%
• Wall St ends 2022 with biggest annual drop since 2008

On the final trading day of 2022, the CME Group's FedWatch Tool was still projecting just a quarter point rate hike at both the Fed's upcoming 1 February and 22 March (2023-Q1) meetings. The FedWatch tool anticipates a third quarter point rate hike, in June (2023-Q2), with the Fed's series of rate hikes topping out at the 5.00-5.25% range. Looking further forward, developing expectations for a U.S. recession in 2023 have the FedWatch tool projecting two quarter point rate cuts in 2023, the first as early as July (2023-Q3) and the second in November (2023-Q4).

The Atlanta Fed's GDPNow tool's latest projection for real GDP growth in the fourth quarter of 2022 spiked higher to +3.7% from the +2.8% estimate of two weeks earlier. The "Blue Chip consensus" continues to project just over 1% real economic growth for the current quarter of 2022-Q4. The BEA will issue its first estimate of 2022-Q4's GDP later this month, on 26 January 2023, which will help determine which of set of nowcasts is more wrong.

We'll present our first look at the alternative futures for 2023-Q1 in the next edition of the S&P 500 chaos series.