Unexpectedly Intriguing!
24 April 2023
Wall Street Sign by Aditya Vyas via Unsplash - https://unsplash.com/photos/7ygsBEajOG0

Rising fears of recession did little to alter the trajectory of the S&P 500 (Index: SPX) during the third week of April 2023. The index ended the week at 4133.52, down just 0.1% from where it closed the previous week.

It didn't start off that way. Earlier in the week, signs that China's efforts to stimulate its economy were finally gaining traction buoyed the U.S. stock market. But by week's end, investors returned their focus to the domestic situation in the U.S. economy, with the net effect of leaving the S&P 500 index just slightly lower.

That action, or lack thereof, can be seen in the latest update to the alternative futures chart. We find the level of the S&P 500 is just a bit below the midpoint of the redzone forecast range we added for last week's update.

Alternative Futures - S&P 500 - 2023Q2 - Standard Model (m=+1.5 from 9 March 2023) - Snapshot on 21 Apr 2023

Our reading of why stock prices behaved as they did in the week that was is drawn directly from the week's market-moving headlines. Here's our summary of the new information investors had to absorb during the past week:

Monday, 17 April 2023
Tuesday, 18 April 2023
Wednesday, 19 April 2023
Thursday, 20 April 2023
Friday, 21 April 2023
Monday, 24 April 2023

The CME Group's FedWatch Tool anticipates the Fed will hike the Federal Funds Rate by a quarter point to a target range of 5.00-5.25% at its upcoming meeting on 3 May (2023-Q2). After that, the FedWatch tool anticipates a series of quarter point rate cuts starting from 1 November (2023-Q4) and continuing at six-to-twelve-week intervals through the CME FedWatch tool's available forecast period, which extends through 25 September 2024 (2024-Q3).

The Atlanta Fed's GDPNow tool's projection for real GDP growth in the first quarter of 2023 held steady at +2.5% over the past week. The so-called Blue-Chip consensus predicts it will be +1.5% (or rather, that's the average of 10 forecasts that anticipate real growth anywhere from +0.3% to +2.5% for 2023-Q1). The GDPNow tool is now fully looking backward instead of forward and will continue to do so until the U.S. Bureau of Economic Analysis releases its advance estimate of real GDP on 27 April 2023.

Image credit: Photo by Aditya Vyas on Unsplash.

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