Unexpectedly Intriguing!
August 19, 2019

For a week where the full U.S. Treasury yield curve inverted as stock prices were quite volatile, the week didn't end all that much differently than the previous week did.

By the end of the week, the S&P 500 (Index: SPX) was about one percentage point lower than a week earlier, as investors continued splitting their forward-looking attention betweeen 2019-Q4 and 2020-Q1. And while investors flirted with focusing more closely on 2019-Q4 during the week, there wasn't enough in the news to shift it more fully onto that particular point of time in the future.

Alternative Futures - S&P 500 - 2019Q3 - Standard Model - Snapshot on 16 Aug 2019

At this point, investors are betting the Federal Reserve will be forced to act aggressively to cut short term interest rates in a bid to revert the yield curve, with the CME Group's FedWatch Tool now projecting as many as four quarter point rate cuts in the four quarters ahead:

CME Group FedWatch Tool Probabilities of Federal Funds Rate Changing at Future FOMC Meeting Dates, Snapshot on 16 August 2019

We think the uncertainty of the timing of rate cuts between 2019-Q4 and 2020-Q1 is what is holding investors' attention on these two future quarters for now, but the potential deterioration of economic circumstances that would lead to the increased probability of rate cuts extending into 2020-Q2 could spark a much more negative reaction in stock prices should investors have reason to really focus on that particular future quarter.

There's also the potential that changes in the expectations for dividends in any of these upcoming quarters will have an impact on stock prices as well. Fortunately, dividend futures have so far been largely stable, where much of the outsized volatility we've seen may be attributed to investors shifting their time horizons in setting their expectations.

That's why we make a point of tracking the market moving headlines each week, which we've presented below. The random onset of new information plays a large role in setting the forward-looking focus of investors.

Monday, 12 August 2019
Tuesday, 13 August 2019
Wednesday, 14 August 2019
Thursday, 15 August 2019
Friday, 16 August 2019

Looking for the bigger picture of the week's news than the headlines we've noted above? Barry Ritholtz lists seven positives and only five negatives in the week's economics and market-related news.

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

JavaScript

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
Recommended Reading
Recently Shopped

Seeking Alpha Certified

Archives
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.