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.

Since our last update three months ago, Standard and Poor's projections have strengthened, indicating expectations of stronger growth through 2022 and 2023. The following chart illustrates how the earnings outlook has changed with respect to previous snapshots:

The improved outlook for S&P 500 earnings has developed even though the Federal Reserve has begun raising interest rates and is signaling larger rate hikes to squelch excess inflation generated by the Biden-Harris administration's fiscal policies. Since those policies represent a growing headwind for the U.S. economy, it raises the question of how much more improvement would have been seen had the Fed chosen to continue holding the Federal Funds Rate at the zero bound.

Reference

Silverblatt, Howard. Standard & Poor. S&P 500 Earnings and Estimates. [Excel Spreadsheet]. 12 May 2022. Accessed 13 May 2022.

After starting the week with a bang, the S&P 500 (Index: SPX) saw its level of volatility die down as investors solidified their forward-looking attention on 2022-Q2.

How long it might stay there is a question that remains to be answered, but the latest update of the alternative futures chart shows the level of stock prices is fully consistent with that assessment.

Better still, we've moved out of the period where the echoes of the past volatility of stock prices affected the accuracy of the dividend futures-based model's projections, which had required us to add redzone forecast ranges to the chart to compensate in helping track the S&P 500's latest Lévy flight events.

Since we've already outlined what may come next for the S&P 500 in an update to the previous entry of our ongoing S&P 500 chaos series, let's recap the market-moving news headlines from the week that was:

Monday, 9 May 2022

• Signs and portents for the U.S. economy:
• U.S. yields ease after hitting 3-1/2 year highs on rate hike unease
• Oil tumbles about 6% as China COVID lockdowns weigh
• Exclusive-Biden sidelined global energy partners with record emergency oil release -sources
• Fed minions claim Fed hasn't missed boat to keep inflation under its control, starting to think supply chain constraints won't go away, hope 75 bps rates won't be needed:
• Fed hawks Waller, Bullard push back on 'behind the curve' view
• Fed may have to carry bulk of burden in hitting inflation goal - Kashkari
• Bostic sees no 75 bps rate hike, hopeful inflation cools
• Bigger trouble developing in China:
• China's exports growth hits two year-low as virus curbs hit factories
• China's April new yuan loans seen falling as demand weakens-Reuters Poll
• Bigger stimulus developing in China:
• China's central bank pledges to step up policy support for slowing economy
• ECB minions suggest they may someday combat inflation:
• Two or three rate hikes this year appropriate -ECB's Holzmann
• BOJ minions doubling down on keeping stimulus policies going:
• BOJ policymakers unwavering on easy policy stance - March meeting minutes
• S&P 500 ends below 4,000 for 1st time since March 2021; growth shares lead decline
• Wall Street slides as higher bond yields hit growth stocks

Tuesday, 10 May 2022

• Signs and portents for the U.S. economy:
• U.S. producers undo years of efficiency gains in fight for supplies
• U.S. oil settles below $100 a barrel on economic worries, strong dollar
• Biden says Fed targeting inflation, China tariffs could fall
• Fed minions anticipate rising unemployment in best case scenario, trying to set expectations for half-point future rate hikes:
• Fed's Williams: 50 bps interest rate hikes at next two meetings "makes sense"
• Fed's Williams: 'soft landing' would still see unemployment rate rise
• Fed's Barkin says central bank can tweak path once its gets to neutral rate
• Fed's Mester backs 50 bps rate hikes, sees no sustained downturn
• Fed's Mester: Will need "compelling" drop of inflation to slow rate hikes
• Mester: MBS sales could mean market losses for Fed
• Fed's Waller says now is the time to 'hit it' on raising rates
• Fed's Waller promises to tackle inflation, says mistakes of the '70s won't be repeated
• BOJ minions doubling down on keeping stimulus going, indications it is no longer independent of Japanese government:
• BOJ rules out widening yield band to stem yen fall
• BOJ's bond buying draws scrutiny after ex-PM calls central bank a govt 'subsidiary'
• Brazil central bankers anticipate more aggressive action to combat inflation:
• Brazil's central bank acknowledges further deterioration in inflation despite 'intense' rate hike cycle
• S&P 500, Nasdaq end up but investors cautious before inflation data
• Stocks Spike, VIX Plunges On Fed's Waller Comments

Wednesday, 11 May 2022

• Signs and portents for the U.S. economy:
• U.S. inflation simmers, worst of price gains likely behind
• Oil up more than 5%, as Russia-EU energy quarrel intensifies
• Average U.S. mortgage interest rate rises to 5.53%, applications up
• Bigger trouble developing in Japan, Ukraine:
• Japan's economy to suffer Q1 slump on lower consumption
• Ukraine Finance Minister forecasts 45% GDP drop, committed to servicing debt
• Nearly 5 million jobs lost in Ukraine as war pummels economy - ILO
• Central banks acting to hike interest rates to combat inflation:
• India's cbank likely to raise inflation projection in June meeting, consider more rate hikes-source
• Hungary cenbank raised interest rates by 100 bps in unanimous April vote -minutes
• Bank of England interest rate could hit 4% or more, ex-policymakers warn
• ECB minions waiting until July 2022 to hike rates to combat inflation:
• ECB firms up expectations for July interest rate hike
• Wall Street ends lower as U.S. inflation data offers little relief to investors

Thursday, 12 May 2022

• Signs and portents for the U.S. economy:
• Oil rises as supply concerns outweigh reduced demand, recession risks
• U.S. Treasury's Yellen says Fed can bring down inflation without causing recession
• U.S. labor market still tightening; producer price gains moderate
• Cass Freight Index sees 'considerable' U.S. freight recession risk
• Fed minions still trying to say only half point rate hikes in the future, start looking to shift blame if U.S. economy experiences a "hard landing" from their policies:
• Fed's Daly backs half-percentage-point rate hikes at next meetings
• Fed Chair Jerome Powell: “Whether we can execute a soft landing or not, it may actually depend on factors that we don’t control.”
• Bigger trouble developing in the U.K., Eurozone:
• UK economy shrinks in March as recession risks mount
• Europe's gas supply crisis grows after Russia imposes sanctions
• Bigger stimulus developing in China:
• China to roll out new policies when needed to support economy - party official
• ECB minions still thinking about doing something about Eurozone inflation:
• ECB's Makhlouf says it is time for Governing Council to act
• S&P drops on fears of prolonged inflation
• Wall Street falls on rate hike worries
• U.S. retail investors turn bearish and elusive in latest selloff

Friday, 13 May 2022

• Signs and portents for the U.S. economy:
• U.S. consumer sentiment approaches 11-year low, monthly import prices unchanged
• Why are food prices going up? Key questions answered
• Oil jumps 4% as U.S. gasoline prices hit record high, stock markets soar
• U.S. economic outlook weakens, inflation set to persist - Philly Fed survey
• Fed minions not doing much to boost confidence in their actions:
• How much Fed must do depends on supply outlook: Kashkari
• Fed's Mester: Need "several months" of inflation moving down to call the peak
• Bigger trouble developing in China:
• China April new bank loans tumble as COVID jolts economy
• Headline fix: That should read "China April new bank loans tumble as government's COVID lockdowns jolt economy"
• Bigger stimulus developing in China:
• China looks to spur job prospects for record number of new graduates
• BOJ minions struggling with inflation and falling yen:
• Japan April consumer inflation seen exceeding central bank's 2% goal: Reuters poll
• Japan warns again about sharp yen moves, BOJ focuses on speed of change
• Wall Street ends tumultuous week with broad rally

According to the CME Group's FedWatch Tool, the Fed will hike rates by a half-point in June (2022-Q2), followed by a two more half-point hikes in July and September (2022-Q3). The Atlanta Fed's GDPNow tool projects real GDP growth of 1.8% in 2022-Q2, down from last week's projection of 2.3%.

Alan Moore has written some highly influential works. Many of which have gone from the page to both the big and small screens, inspiring several generations of storytellers along the way.

He has some interesting advice for anyone seeing to become a good writer:

Alan Moore believes every aspiring writer should read terrible books. Watch and find out why this is an integral part of developing your own style as a writer.

Here's the less than one-and-a-half minute video, which is from Moore’s BBC Maestro storytelling course:

Now, if you're looking for inspiration for terrible books to read, we'll point you to a podcast we mentioned several weeks ago: 372 Pages We'll Never Get Back (Patreon for the freshest episodes, delayed episodes available wherever you get podcasts), which specializes in analyzing what makes the books they read bad while having a lot of fun doing it.

But if you want to read terrible books on your own and you're looking for a list of really badly written books to read, Wikipedia's "List of books considered the worst might serve up some inspiration for you.

In March 2022, the United States imported far more goods than it exported, breaking its previoius record for its monthly trade deficit by a wide margin. We thought the occasion of the new record provided an interesting data visualization opportunity, so let's start with the overall summary:

The U.S. exported $179.5 billion worth of goods in March 2022, while importing $297.0 billion. That makes for a monthly trade deficit of $117.5 billion, which is 14.2% larger than the previous record of $102.9 billion set in November 2021.

Because we regularly follow trade between the U.S. and China, we broke out the portions of each of these categories that are attributable to that portion of the U.S.' overall trade with respect to the rest of the world. We find that U.S. exports to China accounted for 7.5% of that total. U.S. imports from China accounted for nearly 16.0% of all it imported from around the world. Netting these numbers out, we find that the U.S.' trade with China accounted for 28.9% of its entire recorded trade deficit in goods for the month.

We decided to dig deeper into the U.S. Census Bureau's trade data to see what it was that added the most to the U.S.' record high trade deficit in March 2022. Those results are presented in the following interactive chart, for which you may need to click through to our site to get the big picture. Hover your cursor over the dots in the chart to get the related surplus (+) or deficit (-) in millions of U.S. dollars.

The biggest portion of the U.S.' record March 2022 trade deficit was in the category for electric machinery. The second largest portion was for heavy mechanical machinery. (Note: nuclear reactors are included in the title for the official category, but this particular class of goods was a very small contributor to the U.S.' trade deficit in March 2022!) The third largest category covers vehicles, which is mostly accounted for by imports of foreign-made automobiles and trucks. The large number of imports recorded during the month may be attributable to progress finally being made in unloading the backlog of large container ships that queued up in large numbers outside U.S. seaports during 2021.

References

U.S. Census Bureau. Trade in Goods with World, Not Seasonally Adjusted. Last updated: 4 May 2022. Accessed 4 May 2022.

The latest view from the volcano points to a higher level of economic gloom for the global economy.

The explanation for that worsening situation is the same as last month: the expanding economic sanctions imposed against Russia following its invasion of Ukraine and, more significantly, China's government's continuing lockdown of Shanghai that threatens to expand to other areas of China.

We're seeing the effects of both situations show up at the remote Mauna Loa Observatory, located atop a volcano on the big island of Hawaii in the middle of the Pacific Ocean, which measures the concentration of carbon dioxide diffused in the Earth's atmosphere. The following chart reveals the sharp, steep decline in the pace at which carbon dioxide is being added to the Earth's atmosphere since February 2022.

The following tool may be used to convert the decline in the rate of CO₂ accumulation into an estimate of the net GDP loss in the global economy associated with it. If you're accessing this article on a site that republishes our RSS news feed, please click through to our site to access a working version of the tool.

Using the default value of a -0.27 parts per million to account for the change in the rate of growth of atmospheric carbon dioxide since February 2022, we find the equivalent net loss to global GDP attributable to the spread of COVID in southeast Asia and to China's fossil fuel shortage is $9.0 trillion. Going back to the beginning of the coronavirus pandemic in December 2019, the reduction of 0.92 part per million in the rate at which carbon dioxide is being added to the Earth's air corresponds to a net loss to global GDP of $30.6 trillion.

Analyst's Notes

We've updated the population data entry in the version of the tool presented above to reflect Earth's estimated 2021 population. Otherwise, the methodology behind the tool is unchanged from when we first introduced it in 2020.

Meanwhile, since we've forayed into planetary level economic analysis, we should note it has been five months since we developed the first-ever estimate of Mars' GDP. We're about a month away from the end of the latest Martian quarter and our next estimate of Mars' GDP, which is coming due because Martian quarters are roughly twice as long as business quarters on Earth.

References

National Oceanographic and Atmospheric Administration. Earth System Research Laboratory. Mauna Loa Observatory CO2 Data. [Text File]. Updated 5 May 2022. Accessed 5 May 2022.

U.S. Central Intelligence Agency. World Factbook. 1 July 2021 Population Estimate (World). [Online Article | Archived Document]. Accessed 8 May 2022.