Unexpectedly Intriguing!
22 May 2023
Deposit Into Piggy Bank Savings Account</a> by Ken Teegardin via Wikimedia Commons - https://commons.wikimedia.org/wiki/File:Deposit_Into_Piggy_Bank_Savings_Account_(6093700157).jpg

The S&P 500 (Index: SPX) rose 1.65% over its previous week's closing value to end the third week of May 2023 at 4191.98.

It rose primarily as a result of an improved outlook for regional bank stocks, which notably surged during the week. The biggest market moving news of the week came on Wednesday, 17 May 2023, after news Western Alliance had seen its deposits grow by more than $2 billion was disclosed. That announcement was taken as a positive sign that the solvency problems facing regional banks because of the Federal Reserve's series of interest rate hikes is less widespread than had been feared.

That promising development was enough to put the trajectory of the S&P 500 just a little below the middle of the alternative futures chart's redzone forecast range. Which is to say that stock prices are behaving predictably. It is also to say that stock prices are not behaving exceptionally in any way.

Alternative Futures - S&P 500 - 2023Q2 - Standard Model (m=+1.5 from 9 March 2023) - Snapshot on 19 May 2023

We're making that point because the past week's market-related headlines have been jam-packed of references to the debt ceiling debate in Washington, D.C. So many, in fact, it seems to be more the result of an editorial decision to cram it into as many headlines as possible, regardless of whether it's appropriate, than it does of any real market-moving news events. Through 19 May 2023, we find little to no evidence that political debate is having any meaningful material affect on the trajectory of stock prices.

The ongoing situation with regional banks because of their solvency issues however is having more noticeable impact. Here are the past week's market-moving headlines:

Monday, 15 May 2023
Tuesday, 16 May 2023
Wednesday, 17 May 2023
Thursday, 18 May 2023
Friday, 19 May 2023

The CME Group's FedWatch Tool continues to indicate investors believe the Fed has reached the end of the series it began in March 2022 to combat President Biden’s inflation. However, the FedWatch Tool has pushed back its projection for how long the Fed will hold the Federal Funds Rate at a target range of 5.00-5.25%. It now anticipates will wait until its 1 November (2023-Q4) meeting to initiate a series of quarter point rate cuts at six-to-twelve-week intervals to address building recessionary conditions in the U.S. economy.

The Atlanta Fed's GDPNow tool projects a real GDP growth rate of +2.9% in 2023-Q2, up from the +2.9% growth rate it anticipated a week earlier.

Image credit: Deposit Into Piggy Bank Savings Account by Ken Teegardin via Wikimedia Commons. Creative Commons. Attribution-ShareAlike 2.0 Generic (CC BY-SA 2.0).

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