Unexpectedly Intriguing!
15 August 2022

After dipping nearly 23 points from its previous week's close, the S&P 500 (Index: SPX) jumped 2.1% on Wednesday, 10 August 2022 after the Bureau of Labor Statistics reported inflation slowed in July 2022. The index went on to reach 4,280.15 by the end of trading on Friday, 12 August 2022, nearly 3.3% higher than where it closed a week earlier.

In doing that, investors fixed their attention more fully on the distant future quarter of 2023-Q1 in setting current day stock prices. The latest update to the alternative futures chart shows that development.

Alternative Futures - S&P 500 - 2022Q3 - Standard Model (m=-2.5 from 16 June 2021) - Snapshot on 12 Aug 2022

This week's inflation news suggests the Federal Reserve's campaign to slow inflation by slowing the economy is finally having its desired effect. Investors are now looking at 2023-Q1 as the quarter in which the Federal Reserve's ongoing series of rate hikes will peak.

That can be seen in how the CME Group's FedWatch Tool projections of the Fed's future interest rate hikes have changed. Investors are now anticipating a half point rate hike in September 2022 (2022-Q3), down from the three-quarter point rate hike they anticipated last week. The FedWatch tool indicates it will followed by another half point rate hike in November (2022-Q4), then a quarter point rate hike in December (2022-Q4), which may now mark the end with the Fed's target Federal Funds Rate topping out in the 3.50-3.75% range. After that, FedWatch tool anticipates it will hold that level through July 2023, but with a growing likelihood of rate cuts as more time passes and as economic growth slows.

More stuff than that happened during the week that was. Here's our recap of the otherwise quiet news week's market-moving headlines:

Monday, 8 August 2022
Tuesday, 9 August 2022
Wednesday, 10 August 2022
Thursday, 11 August 2022
Friday, 12 August 2022

The Atlanta Fed's GDPNow tool's forecast for real GDP growth in 2022-Q3 surged to 2.5%, up from last week's projection of 1.4%.

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