Unexpectedly Intriguing!
06 January 2020

The last two weeks have been surprisingly busy. Picking up 2020 from where we left off in 2019, the S&P 500 (Index: SPX) continued to record new highs through 27 December 2019, reaching a total of 35 record highs during 2019. Then, after a brief pause, the S&P 500 set one more new record high of 3,257.85 to open 2020, before retreating 23 points as geopolitics dampened investor outlooks in early 2020.

All this combined to place the S&P 500 right in the middle of the redzone forecast range we added to our alternative futures chart several weeks ago.

Alternative Futures - S&P 500 - 2019Q4 - Standard Model with Redzone Forecast Focused-on-2020Q3-Between 26-Nov-2019 and 07-Jan-2020 - Snapshot on 30 Dec 2019

That range has another day or two to go before it runs out, where we'll introduce our first spaghetti forecast chart to anticipate the S&P 500's future in 2020-Q1 next week.

We would be remiss if we didn't point out that the last 22 of the S&P 500's new closing highs coincides with a period during which the U.S. Federal Reserve actively flooded U.S. money markets with liquidity, which began on 11 October 2019 with the Fed's announcement it would begin buying massive quantities of U.S. Treasury bills.

That quantitative easing-like policy has taken some of the pressure off the Fed to announce additional rate cuts, where according to the CME Group's Fedwatch tool through the close of trading on Friday, 3 January 2020, investors are split in betting whether 2020-Q4 will see a quarter point rate cut or a quarter point rate hike.

CME Group FedWatch Tool Probabilities of Federal Funds Rate Changing at Future FOMC Meeting Dates, Snapshot on 30 December 2019

That particular outlook may be very short lived given the onset of new information to influence how far into the future investors may focus their attention. Here are the headlines we noted throughout the holiday season for U.S. markets.

Monday, 23 December 2019
Tuesday, 24 December 2019
Thursday, 26 December 2019
Friday, 27 December 2019
Monday, 30 December 2019
Tuesday, 31 December 2019
Thursday, 2 January 2020
Friday, 3 January 2020

Over our holiday break, Barry Ritholtz continued summarizing the positives and negatives he found in the economics and market-related news over both weeks of 2019's year-end holiday season.

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