Unexpectedly Intriguing!
06 July 2021

The S&P 500 (Index: SPX) roared to new record highs, closing the trading week at 4,352.34, having closed higher on each of its last seven trading days.

The alternative futures chart shows the trajectory of the index rising to the top end of the latest redzone forecast range:

Alternative Futures - S&P 500 - 2021Q3 - Standard Model (m=-2.5 from 16 June 2021) - Snapshot on 2 Jul 2021

The redzone forecast assumes investors would focus on 2021-Q3 in setting current day stock prices, but that may have changed during the past week, thanks to the continuing efforts of Federal Reserve officials to set expectations they will not hike rates until late 2023 to respond to inflation, which they continue to claim is transitory.

Instead, the economic data is such that Fed officials are instead signalling they will begin tapering their stimulus bond buys at the end of 2021, which we think may have prompted investors to shift their forward looking attention outward to the more distant future quarter of 2022-Q1.

When we refer to future quarters, we're referring to the periods covered by dividend futures contracts, which do not follow calendar quarters. For example, 2021-Q4 will end when its dividend futures contract expires on the third Friday of December 2021, or rather, on 17 December 2021. The Federal Reserve's Federal Open Market Committee's final meeting of the year will occur earlier that week, where any action they choose to take would begin just as 2021-Q4 ends, which is why investors would focus on 2022-Q1.

Our thinking is paced in part by the market moving headlines of the week that was, where you can see the efforts of the Fed's minions to set future expectations:

Monday, 28 June 2021
Tuesday, 29 June 2021
Wednesday, 30 June 2021
Thursday, 1 July 2021
Friday, 2 July 2021

Need more U.S. markets and economy news? The old standby of the Wall Street Journal provides above average news coverage, falling in the "center" range of Allsides' bias ratings.

The next week will be interesting because of the S&P 500's current streak of consecutive higher daily closes. We'll find out how close it might get to a new record in that category as well!

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