Unexpectedly Intriguing!
August 12, 2019

The last two weeks have been especially volatile for the S&P 500 (Index: SPX), where as of the close of trading on Friday, 9 August 2019, our dividend futures-based model describes the level of the S&P 500 as being consistent with investors splitting their forward-looking focus between the future quarters of 2019-Q4 and 2020-Q1.

Alternative Futures - S&P 500 - 2019Q3 - Standard Model - Snapshot on 9 Aug 2019

The primary driver of the market's volatility over that time has been investors shifting their attention back and forth between these two future quarters. Those shifts have themselves been driven by changing investor expectations for the upcoming timing of future Fed rate cuts and the potential resumption of a new round of quantitative easing.

As of Friday, 9 August 2019, here are investor expectations as provided by the CME Group's FedWatch Tool for what the Fed will do with the Federal Funds Rate at its Federal Open Market Committee's upcoming meeting dates:

CME Group FedWatch Tool Probabilities of Federal Funds Rate Changing at Future FOMC Meeting Dates, Snapshot on 09 August 2019

These probabilities indicate investors are expecting three quarter point rate cuts, in 2019-Q3, 2019-Q4, and 2020-Q1, with the most uncertainty around that last future quarter.

Here are the first week of August 2019's market-moving headlines:

Monday, 5 August 2019
Tuesday, 6 August 2019
Wednesday, 7 August 2019
Thursday, 8 August 2019
Friday, 9 August 2019

Elsewhere, Barry Ritholtz put together a short list with an equal number of positives and negatives in the week's economics and market-related news.

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