Unexpectedly Intriguing!
17 June 2019

After several weeks of volatility, the S&P 500 (Index: SPX) settled down during the second week of June 2019, as might be expected for when investors are focusing their forward-looking attention on the distant future quarter of 2020-Q1.

Alternative Futures - S&P 500 - 2019Q2 - Standard Model - Snapshot on 14 Jun 2019

The reason they're doing that is because they are currently betting on the Fed cut U.S. interest rates three times between now and the end of that quarter: a quarter point cut coming soon in 2019-Q3, possibly as early as July, with at least one an possibly another two quarter point rate cuts by the end of 2019-Q4. The following snapshot from the CME Group's FedWatch Tool reveals these current expectations:

CME Group FedWatch Tool - Probabilities of Changes in Federal Funds Rate Expected at Upcoming FOMC Meeting Dates - Snapshot on 14 Jun 2019

At this time, we think stock market investors are betting that third quarter point rate cut would more realistically happen in 2020-Q1 - if they anticipated that it was on tap for 2019-Q4, we would see stock prices decline sharply from their current level, similar to what happened in May 2019.

Speaking of which, if you've been following our S&P 500 chaos series over the past several weeks, you'll be very familiar with all the shifts in how far investors are looking into the future that have driven the recent volatility in stock prices.

We're just happy that it was a much quieter week with Fed officials having entered their communication blackout period ahead of the Federal Open Market Committee's upcoming two-day meeting on 18-19 June 2019 - the quiet before the storm for investors, so to speak, where investors kept their focus on 2020-Q1 because there wasn't any news to prompt them to shift their attention toward a different point of time in the future to continue driving more volatility into stock prices. Here are the headlines we picked out from the flow of news during the last week.

Monday, 10 June 2019
Tuesday, 11 June 2019
Wednesday, 12 June 2019
Thursday, 13 June 2019
Friday, 14 June 2019

But wait, there's more! Barry Ritholtz counted 6 positives and 6 negatives in his review of the week's major economic and market-related news.

Otherwise, sharp eyed readers will recognize that we've added some additional vertical bands to the right hand side of the S&P 500 alternative futures "spaghetti" forecast chart above, when compared to previous versions. Because the dividend futures-based model behind this chart uses historic stock prices from 13 months, 12 months and 1 month earlier as the base reference points from which it makes its projections into the future, these vertical bands indicate the periods where the echo of past volatility in stock prices will affect the accuracy of its projections of the future. This is a direct consequence of the volatility the S&P 500 began to experience during May 2019, where the upcoming echo will lead our model's projections to undershoot the likely trajectory of the S&P 500, assuming investors remain focused on 2020-Q1.

With investors shifting their attention backwards and forwards in time frequently during the last month however, who knows how long that assumption might hold?

Labels: ,

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:

ironman at politicalcalculations.com

Thanks in advance!

Recent Posts

Stock Charts and News

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

This page is powered by Blogger. Isn't yours?

CSS Validation

Valid CSS!

RSS Site Feed

AddThis Feed Button


The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.

Other Cool Resources

Blog Roll

Market Links

Useful Election Data
Charities We Support
Shopping Guides
Recommended Reading
Recently Shopped

Seeking Alpha Certified

Legal Disclaimer

Materials on this website are published by Political Calculations to provide visitors with free information and insights regarding the incentives created by the laws and policies described. However, this website is not designed for the purpose of providing legal, medical or financial advice to individuals. Visitors should not rely upon information on this website as a substitute for personal legal, medical or financial advice. While we make every effort to provide accurate website information, laws can change and inaccuracies happen despite our best efforts. If you have an individual problem, you should seek advice from a licensed professional in your state, i.e., by a competent authority with specialized knowledge who can apply it to the particular circumstances of your case.