Unexpectedly Intriguing!
27 February 2023
Greyscale Wall Street Signage by Patrick Weissenberger via Unsplash - https://unsplash.com/photos/uJhgEXPqSPk

The S&P 500 (Index: SPX) lost nearly 2.7% of its value during the Presidents Day holiday-shortened trading week ending on Friday, 24 February 2023. The index closed the week at 3970.04.

Most of that change took place on Tuesday, 21 February 2023 as more indications of a global economy slowdown arrived. The rest of that change took place on Friday, 24 February 2023 as evidence inflation is running hotter than expected became known. The combination of these developments dragged the S&P 500 lower toward the bottom end of our recently adjusted redzone forecast range.

Alternative Futures - S&P 500 - 2023Q1 - Standard Model (m=+2.0 from 13 September 2022) - Snapshot on 24 Feb 2023

If you recall last week's edition, the redzone forecast shown in the alternative futures chart reflects the hypothesis the U.S. stock market has entered a new regime. Our main alternate hypothesis, the old market regime still holds but the S&P 500 is running hot, may soon come back into play.

How will we know? We'll be able to tell if the trajectory of the S&P 500 persistently falls below the redzone forecast range shown shown in the chart above. We should find out pretty quickly.

In the meantime, here are the market moving headlines from the short trading week that was!

Tuesday, 21 February 2023
Wednesday, 22 February 2023
Thursday, 23 February 2023
Friday, 24 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 and yet another at the Fed's 14 June (2023-Q2) meeting, with rates topping out in a target range from 5.25%-5.50%. After that, the FedWatch tool now anticipates the Fed will hold rates steady through the end of 2023, taking rate cuts off the table for the year.

The Atlanta Fed's GDPNow tool's projection for real GDP growth in the first quarter of 2023 rose to +2.7% from its previous +2.5% estimate.

Image credit: Photo by Patrick Weissenberger on Unsplash.

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