Unexpectedly Intriguing!
13 February 2023

The S&P 500 (Index: SPX) dropped 1.1% to close the trading week ending Friday, 10 February 2023 at 4090.46.

But according to the dividend futures-based model, the trajectory of the index is running hot compared with the latest redzone forecast. Here's the newest update to the alternative futures chart showing that situation:

Alternative Futures - S&P 500 - 2023Q1 - Standard Model (m=+2.0 from 13 September 2022) - Snapshot on 10 Feb 2023

Another way to read the level of the S&P 500's trajectory is that it's running about six to seven weeks ahead of the dividend futures-based model's schedule.

There's another possibility that might explain the current trajectory of stock prices. As shown, the model is currently based on the assumption its multiplier is +2.0, which is consistent with how investors have been setting stock prices since 13 September 2022. But what if that has changed for 2023?

One hypothesis we're currently evaluating behind the scenes is that the multiplier may have shifted to zero at the beginning of the year. Here's what the alternative futures chart looks like with that assumption.

Alternative Futures - S&P 500 - 2023Q1 - Standard Model (m=+0.0 from 3 January 2023) - Snapshot on 10 Feb 2023

Time will tell which of these scenarios is right. Unfortunately, unlike changes in dividend expectations that are easy to identify, the factors that cause the dividend futures-based model's basic multiplier to shift are much more opaque. Our thinking is those shifts are affected by substantial changes in expectations for earnings growth, inflation and interest rates, but lack the data to be able to tell one way or another. Despite having invented and developed the model in 2008 and early 2009, we only have the experience of its multiplier changing from 2020 onward to test that proposition. The jury is very much out for what variables contribute to the shifts in the multiplier, which is why we rely on observation to determine its approximate value.

Meanwhile, the model works in forecasting stock prices because the multiplier tends to be constant for sustained periods of time. Since 2008, we've seen everything from a matter of weeks (in early 2020) to more than a decade (before early 2020)! How long those periods are sustained is one of the chaotic factors that make the behavior of stock prices so fascinating.

Monday, 6 February 2023
Tuesday, 7 February 2023
Wednesday, 8 February 2023
Thursday, 9 February 2023
Friday, 10 February 2023

The CME Group's FedWatch Tool continues to project a quarter point rate hike at the Fed's upcoming 22 March (2023-Q1) meeting, followed by another at its 3 May (2023-Q2) meeting, with the latter representing the last for the Fed's series of rate hikes that started back in March 2022. After that, the FedWatch tool anticipates the Fed will hold the Federal Funds Rate at a target range of 5.00-5.25% until 1 November 2023 (2023-Q4). It anticipates a quarter point rate hike six weeks later when the Fed meets in mid-December (2023-Q4).

The Atlanta Fed's GDPNow tool's projection for real GDP growth in the first quarter of 2023 jumped to +2.2% from its previous +0.7% estimate.

Labels: ,

About Political Calculations

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

ironman at politicalcalculations

Thanks in advance!

Recent Posts

Indices, Futures, and Bonds

Closing values for previous trading day.

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

This page is powered by Blogger. Isn't yours?

CSS Validation

Valid CSS!

RSS Site Feed

AddThis Feed Button


The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.

Other Cool Resources

Blog Roll

Market Links

Useful Election Data
Charities We Support
Shopping Guides
Recommended Reading
Recently Shopped

Seeking Alpha Certified