Unexpectedly Intriguing!
04 January 2022

2021 ended with a possible solution to the question of "what causes a Santa Claus rally on Wall Street?"

That's because investors shifted their forward-looking focus from 2022-Q1 to the more distant future quarter of 2022-Q4. The Lévy flight shift began on 22 December 2021 and was completed a week later on 29 December 2021, with investors' attention remaining fixed on 2022-Q4 as 2021 came to an end.

Alternative Futures - S&P 500 - 2021Q4 - Standard Model (m=-2.5 from 16 June 2021) - Snapshot on 31 Dec 2021

In 2021, that shift meant a late year surge in the S&P 500 (Index: SPX) according to the dividend futures-based model we use to project the potential futures for the index.

How long they might keep their attention on that specific point of time in the future remains to be seen, but any shift in focus to the nearer term future will almost certainly be accompanied by a noticeable downward movement in stock prices when it occurs. We anticipate such Lévy flight events will contribute to outsized volatility during 2022 given investors' current expectations for changes in the rate of growth for dividends.

What we don't know is when that might happen, which will be driven by the random onset of new information. Speaking of which, here are the headlines we noted for their market moving potential during the last two weeks of 2021.

Monday, 20 December 2021
Tuesday, 21 December 2021
Wednesday, 22 December 2021
Thursday, 23 December 2021
Monday, 27 December 2021
Tuesday, 28 December 2021
Wednesday, 29 December 2021
Thursday, 30 December 2021
Friday, 31 December 2021

Through 31 December 2021, the CME Group's FedWatch Tool is predicting the U.S. Federal Reserve will hike the Federal Funds Rate four times, with quarter point rate hikes in March, June, September, and December 2022.

And finally, here's a snapshot of CME Group's Quarterly Dividend Index Futures for each quarter through 2022 as of the end of 2021:

Past and Projected S&P 500 Quarterly Dividends per Share, 2021-Q1 through 2022-Q4

How much will expectations for the future change during 2022?

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