The S&P 500 (Index: SPX) quickly recovered from the outbreak of geopolitical noise originating from the Eurozone in the previous week, rising 143.10 points (+3.6%) to end the Labor Day Holiday-shortened trading week at 4,067.36.
The change puts the level of the index back within the typical range anticipated by the dividend futures-based model for investors focusing on the current quarter of 2022-Q3. The latest update to the alternative futures chart shows that development.
With the geopolitical noise tied to energy demand and the very short supply of fossil fuels in Germany, the trigger for dissipating the noise can be traced to a decision by Germany's government to continue operating two nuclear power generating stations it previously planned to shutter without replacement by the end of this year. The sudden reversal of its anti-nuclear power policies greatly reduced the country's projected developing shortage of fossil fuels in the short term, which threatened to throw the country into deep recession from its poorly considered energy policies.
In the first week of September 2022, the inevitable outcome to Germany's bad policies threatened to bleed out into the global economy, which created the negative noise event causing stock prices to drop to "deeply undervalued territory". But all noise events end, it was only ever a question of when. Germany's energy policy U-turn was the week's main market-moving event.
Of course, other stuff happened too. Here's our summary of the week's lesser market-moving headlines:
- Tuesday, 6 September 2022
- Signs and portents for the U.S. economy:
- U.S. service sector keeps momentum in August; price pressures ease - ISM survey
- Oil sinks as demand fears take steam out of OPEC-led rally
- Europe heading for recession as cost of living crisis deepens
- EU gas price rockets higher after Russia halts Nord Stream flows
- Euro zone business activity contracted again in August -PMI
- German services sector stumbles as soaring inflation hits confidence - PMI
- German industrial orders fall sixth month in a row as Ukraine war bites
- Bigger trouble developing in Japan, China:
- Japan's services sector shrinks for first time in five months in August - PMI
- China's trade likely lost steam in Aug as demand shrinks - Reuters poll
- Bigger stimulus developing in China:
- China policymakers see renewed urgency for economic support
- China central bank to cut FX reserve ratio to help limit yuan weakness
- China's top banks face narrowing margins as calls to help economy grow
- Central Banks firing up rate hikes:
- Australia's central bank hikes by 50 bps, signals more ahead
- European Central Bank to go large with 75 bps move on Thursday - Reuters poll
- Wall Street ends busy post-summer session in the red
- Wednesday, 7 September 2022
- Signs and portents for the U.S. economy:
- Oil settles below $90 as recession fears mount
- U.S. trade deficit narrows in July; exports at record high
- U.S. firms see tentative progress on inflation and labor supply, Fed says
- U.S. may need 7.5% unemployment to curb inflation -research
- Fed minions talking up higher interest rates:
- Fed's Barkin warns rates must stay high until inflation eases- FT
- Fed's Brainard says inflation fight will last "as long as it takes"
- Fed's Collins: 'more to do' on U.S. interest rate hikes
- Fed's Mester warns high rents mean inflation may not yet have peaked
- Bigger trouble developing in China:
- China's 2022 property sector outlook worsens, home prices seen falling
- China's trade falters as demand wanes at home and abroad
- Mixed news for the Eurozone:
- Euro zone Q2 growth revised up, supported by household spending
- Factbox-Euro zone bill for cost of living crisis nears 300 billion euros
- BOJ minions determined to keep never-ending stimulus going:
- More central banks fire up interest rate hikes, plan to slow pace as economies cool:
- Bank of Canada unveils 75-basis point hike and flags more increases
- Polish central bank slows down rate hikes, projects decline in GDP growth
- Australia's central bank opens door to slower rate hikes
- Stocks jump as Treasury yields ease and oil prices sell off
- Thursday, 8 September 2022
- Signs and portents for the U.S. economy:
- Oil prices fall further as China extends COVID curbs
- U.S., Indo-Pacific countries launch new-generation trade talks shunning tariff cuts
- With U.S. railroad shutdown threatening, industry counts the cost
- Fed minions "strongly committed" to fighting inflation, say it won't hurt much, and claim they can do more than one task at time:
- Powell says Fed "strongly committed" to inflation fight
- Fed's Powell hopeful inflation can be tamed without pain of Volcker era
- Fed's Powell: Fed's two mandates not in conflict
- Fed 'could very well' hike rates by 75 basis points this month, Evans says
- Fed's 'soft landing' hopes alive as it edges toward another big rate hike
- Bigger trouble developing in the Eurozone:
- German economic institutes cut 2023 GDP forecast on energy price surge
- Exclusive-German economy ministry reviews measures to curb China business
- ECB minions excited to deliver bigger rate hike into worsening economy:
- ECB raises rates by unprecedented 75 basis points
- ECB promises more rate hikes after unprecedented increase
- Lagarde comments at ECB press conference
- Wall Street ends higher, gains driven by banks, healthcare
- Friday, 9 September 2022
- Signs and portents for the U.S. economy:
- Fed minions want MOAR, BIGGER rate hikes!
- Fed races down the home stretch toward another oversized rate hike
- Fed's Waller: need aggressive rate hikes now while economy can take it
- Bigger trouble developing in China:
- China's consumer, producer inflation slows in August as COVID saps demand
- China's Aug new bank loans rise less than expected, credit growth slows
- BOJ minions getting results they want from falling yen, say they'll keep it from rapid collapse:
- Japan Aug trade deficit seen at near 9-year high as weak yen boosts imports - Reuters poll
- BOJ's Kuroda weighs in to warn against 'rapid' yen moves
- ECB, Eurozone minions thinking inflation may be a problem:
- ECB's Villeroy says: inflation will stay high next year
- ECB must keep on raising rates to fight inflation, policymakers say
- Euro zone to coordinate with ECB to fight inflation, avoid adding price pressure
- Banks call 75 bps ECB October rate hike
- Wall Street scores first weekly gain since mid-August
The CME Group's FedWatch Tool still anticipates a three-quarter point rate hike in September (2022-Q3), but now projects a half-point rate hike in November (2022-Q4), followed by a quarter-point rate hike in December 2022. In 2023, the FedWatch tool predicts one last quarter-point rate hike in March (2023-Q1), with the Fed's series of rate hikes topping out in a target range of 4.00-4.25%. The FedWatch tool then forecasts the Fed will be forced to respond to developing recessionary conditions by announcing a quarter point rate cut in June (2023-Q2).
The Atlanta Fed's GDPNow tool's forecast for real GDP growth in 2022-Q3 plunged 2.6% to 1.3% over the past week, fully reversing the growth surge it predicted a week ago.
Update 13 September 2022
And then the August 2022 inflation report dropped, crashing the expectatation the Federal Reserve's minions might be able to pull off a "soft landing".
It may finally be time to reset the value of m, the basic multiplier used in the dividend futures-based model.