Political Calculations
Unexpectedly Intriguing!
20 November 2024
A crystal ball with the word 'SP 500' written inside it (and 'Dividends' above it) - Image generated by Microsoft Copilot Designer.

The outlook for the S&P 500 (Index: SPX) quarterly dividends per share has continued to improve over the last several weeks.

Beyond simply reporting on that trend, we can now provide a first look at how the index' quarterly dividends payouts are expected to come in throughout each quarter of 2025!

For good measure, we can also show how those expectations have changed since the morning of 5 November 2024. This period coincides with the strongest rally in the S&P 500 in more than a year, which recently saw the index break through the 6,000 level for an all-time high record close.

All these things are shown in the following animated chart, which shows the snapshots we have of the outlook for the S&P 500's dividends on both 5 November 2024 and 15 November 2024.

Animation: Monthly Snapshots of the Future of S&P 500 Quarterly Dividends per Share for Each Quarter of 2025, 5 November 2024 and 15 November 2025

How changes in the outlook for dividends at specific points of time in the future affects stock prices is described by this math.

More About Dividend Futures Data

For this series, we have been taking a snapshot of the CME Group's S&P 500 quarterly dividend futures data shortly after the second or third week of each month.

Dividend futures indicate the amount of dividends per share to be paid out over the period covered by each quarter's dividend futures contracts, which start on the day after the preceding quarter's dividend futures contracts expire and end on the third Friday of the month ending the indicated quarter. So for example, as determined by dividend futures contracts, the now "current" quarter of 2024-Q4 began on Saturday, 21 September 2024 and will end on Friday, 20 December 2024.

That makes these figures different from the quarterly dividends per share figures reported by Standard and Poor. S&P reports the amount of dividends per share paid out during regular calendar quarters after the end of each quarter. This term mismatch accounts for the differences in dividends reported by both sources, with the biggest differences between the two typically seen in the first and fourth quarters of each year.

Image Credit: Microsoft Copilot Designer. Prompt: "A crystal ball with the word 'SP 500' written inside it". And 'Dividends' written above it, which we added.

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19 November 2024
A crystal ball with the word 'SP 500' written inside it (and 'Earnings' above it) - Image generated by Microsoft Copilot Designer.

Every three months, we take a snapshot of the expectations for future earnings in the S&P 500 (Index: SPX) at approximately the midpoint of the current quarter, shortly after most U.S. firms have announced their previous quarter's earnings.

The index' earnings per share show little change with respect to where they were just three months earlier. We find some minor erosion in 2024-Q4's projected earnings, which dipped from $216.65 per share on 13 August 2024 to $211.67 per share on 13 November 2024.

Meanwhile, there's virtually no meaningful change in Standard and Poor's projections of the S&P 500's earnings per share at the end of 2025-Q4. Here, we see S&P's forecast dipped by a trivial 25 cents per share, from $250.87 in mid-August 2024 to $250.62 in mid-November 2024.

These developments are shown on the following chart:

Forecasts for S&P 500 Trailing Twelve Month Earnings per Share, December 2017-December 2025, Snapshot on 13 November 2024

At this point, we'll observe that it's changes in the outlook for dividends per share, rather than earnings per share, that primarily drives stock prices. The last three months have been characterized by the S&P 500 rising to new record highs, though there has been very little-to-negative changes in its earnings per share outlook. We'll present how the outlook for the S&P 500's dividends per share in the very near future.

Reference

Silverblatt, Howard. Standard & Poor. S&P 500 Earnings and Estimates. [Excel Spreadsheet]. 13 November 2024. Accessed 1 November 2024.

Image Credit: Microsoft Copilot Designer. Prompt: "A crystal ball with the word 'SP 500' written inside it". And 'Earnings' written above it, which we added.

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18 November 2024

The S&P 500 (Index: SPX) definitively broke through the 6,000 level on Monday, 8 November 2024, closing at an all-time record high of 6,001.35 that day.

Unfortunately, by the end of the week, the index fell by 2.2% from that new high to end the week at 5,870.62.

The precipitating event for that drop came on Thursday, 14 November 2024 as Federal Reserve Chair Jerome Powell stated that he saw no need to rush interest rate cuts. That was followed up by similar statements by other Fed officials.

In response to that new information, investors dialed back their expectations for future rate cuts. The CME Group's FedWatch Tool still anticipates a 0.25% cut in the Federal Funds Rate the Fed controls on 18 December 2024, but the odds dropped from a near lock a week earlier to a 62% probability this week. The FedWatch Tool also projects another quarter point rate cut on 19 March 2025, followed by one last one on 17 September 2025, with the Federal Funds Rate bottoming at a target range of 3.75-4.00%.

The result of that change pushed the trajectory of the S&P to the bottom end of the range that would be expected for investors focusing on the distant future quarter of 2025-Q2. The latest update of the alternative futures chart captures the market's response to the news of the Fed's signaling.

Alternative Futures - S&P 500 - 2024Q4 - Standard Model (m=+1.5 from 9 March 2023) - Snapshot on 15 Nov 2024

The sudden change in the market's trajectory is such that we're now on the lookout for indications a new market regime is setting up. It's too early to make that determination now, but the next several weeks will be important in determining whether the market is simply responding to a short-term noise event or if something more fundamental is changing within it.

Either way, part of that determination relies on the random onset of new information. Here are the past week's market moving headlines:

Monday, 11 November 2024
Tuesday, 12 November 2024
Wednesday, 13 November 2024
Thursday, 14 November 2024
Friday, 15 November 2024

The Atlanta Fed's GDPNow tool's projection of the real GDP growth rate for the current quarter of 2024-Q3 was unchanged at +2.5%.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon with a sad Wall Street bull in front of a stock market chart showing a downtrend in an office, and a bear leaving the office holding a box that says 'FUTURE RATE CUTS'". We tweaked some parts of the image to convey the downward shift in the index and to properly label the bear's box.

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15 November 2024
Las Vegas Electronic Billboard near Planet Hollywood with Kalshi Prediction Market 2024 U.S. Presidential Election Results 6 November 2024

The biggest math story of 2016 was the failure of political polls to accurately predict the outcome of the U.S. presidential election. Eight years later, they failed again, suggesting the presidential race would be tight and could go in favor of either candidate. It wasn't.

Expecting a tight race, political fanatics watching established mainstream news outlets for the latest election returns were in for a long night. The slow pace at which states reported their results meant it would be hours after the polls closed before these observers would have any good sense of which candidate won the race.

But election watchers in Las Vegas had a very different election night experience. Kalshi, the only prediction market in which Americans could directly bet on who would win the U.S. presidential race, took out massive electronic billboard ads providing real-time updates on the market's prediction of who would win the race in Las Vegas. Because they did, everyone within sight of these billboards, or for that matter, anyone with a mobile device who could access Kalshi's elections web site for the race, knew early in the evening of 5 November 2024 that Donald Trump was very much on track to beat Kamala Harris to win the election. The die had been cast.

By the time our lead photo was taken the following morning, the final results of the election die toss were clear. The odds had swung and they swung decisively. Even though many states were still reporting election results, Kalshi's prediction market outperformed both the polls and the official reporting of election results to confirm Donald Trump had locked up a sweeping victory hours before it became official. What's more, Americans who had put money on a Trump victory in the prediction markets won money. The following chart shows how Kalshi's odds for each candidate changed throughout the election before being effectively settled shortly after election day voting ended in the western United States.

Kalshi 2024 presidential election probabilities from 4 October through 6 November 2024

Kalshi's 2024 U.S. presidential prediction market begins in early October 2024 because the firm only won the right to operate its prediction market in the U.S. on 2 October 2024, following an year-long legal battle with the U.S. Commodity Futures Trading Commission who blocked it from operating in September 2023.

The success of prediction markets in anticipating the outcome of the 2024 U.S. presidential election raises several good questions, starting with "what is a prediction market?" Robin Hanson's 18-minute video introduction to prediction markets provides an excellent overview of the ideas behind what they are and how they work:

Prediction markets can deliver superior performance because they directly address many of the inherent shortcomings of traditional political polling. While not perfect, they represent a significant advance over the kind of political polling that has repeatedly come up short in accurately predicting major election outcomes during the past eight years.

There's more to the story of prediction markets, particularly with the best known one, Polymarket, which is still making headlines for reasons other than its success in anticipating the outcome of the U.S. elections. We opted to focus on Kalshi for this article because its operator cleared the hurdles needed to operate in the U.S. during the 2024 election.

We predict prediction markets will be much more visible when the 2028 election rolls around. If their success continues, they may very well replace traditional political polling.

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14 November 2024

China's emissions of carbon dioxide are so immense that its difficult to fully grasp their scale. However, thanks to the United Nations, we have a unique set of data that makes it possible to visualize how immense its CO₂ emissions are compared to other nations.

That data was presented in the form of a table, which doesn't quite do the numbers justice. We've taken a portion of that data and visualized it, comparing China's carbon dioxide output to the combined CO₂ emissions of several of the world's major economic regions during 2023. In the following chart, those emissions are measured in millions of metric tons of CO₂ equivalent (MtCO2e) greenhouse gases, which factors together the contributions of several gases that contribute to the greenhouse effect in the Earth's atmosphere.

China versus Major Economic RegionsTotal Greenhouse Gas Emissions in 2023

What makes this data unique is that China's output of 16,000 MtCO2e for 2023 coincidentally matches the combined output of carbon emissions from the United States, India, the 27 nations of the European Union, and the Russian Federation. That's something that's not easy to see in the table of numbers presented in the UN's Emissions Gap Report, but it leaps out when you visually compare the emissions side-by-side in a simple bar chart.

China's estimated population in 2023 was 1,413,142,846 people, which compares with a combined population of 2,331,402,007 for the United States, India, European Union, and Russian Federation. China's per capita emissions total 11.32 metric tons of CO2e, which is nearly 65% larger than the 6.86 metric tons of CO2e per capita emissions for the major economic regions featured in the chart whose combined total emissions equal those of China.

References

United Nations Environment Programme (UNEP). Emissions Gap Report 2024: No more hot air… please! Table ES.1 (and Table 2.2) Total, per capita and historical emissions of selected countries and regions. DOI: 10.59117/20.500.11822/46404. 24 October 2024.

U.S. Central Intelligence Agency. The World Factbook (2023 Archive). Field Listing - Population. [Online Data]. 28 December 2023.

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About Political Calculations

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

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