Unexpectedly Intriguing!
06 June 2022

With no new Lévy flight events for the S&P 500 (Index: SPX), the recent volatility for the U.S. stock market settled down during the past week. In their place, the index substituted what we consider to be garden variety noise in its day-to-day trading activities.

By the end of the week, the level of the S&P 500 remains consistent with the dividend futures-based model projection associated with investors focusing their forward-looking attention on 2022-Q3. The latest update to the alternative futures chart confirms that assessment.

Alternative Futures - S&P 500 - 2022Q2 - Standard Model (m=-2.5 from 16 June 2021) - Snapshot on 3 Jun 2022

What the Fed will do with interest rates in September 2022 remains the key concern for investors, where whether the Fed takes a break from its current plan to hike the Federal Funds Rate by a half point every six weeks was put on the table a week earlier, only to be seemingly taken back off the table in the past week. Or not. Investors ended the week with more questions than answers about what the Fed will do at that future point of time, which is why it has become their primary time horizon.

Here are the market-moving headlines for the week ending 3 June 2022, where you can get a sense of both how and when investors were exposed to the news that altered their future expectations.

Tuesday, 31 May 2022
Wednesday, 1 June 2022
Thursday, 2 June 2022
Friday, 3 June 2022

The CME Group's FedWatch Tool still projects half point increases in the Federal Funds Rate after the Fed meets in June (2022-Q2) and July (2022-Q3). However, the FedWatch tool is now indicating a third half point rate hike in September (2022-Q3), up from the quarter point it forecast last week. That's followed by quarter point increases in November and December (2022-Q4). For its part, the Atlanta Fed's GDPNow tool turned more pessimistic in the past week. Its forecast of real GDP growth of 1.3% for the U.S. in 2022-Q2 is down from last week's projection of 1.9% annualized growth for the current quarter.

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