Unexpectedly Intriguing!
10 June 2024
An editorial cartoon in the style of Charles Schulz featuring Charlie Brown trying to kick a football while Lucy pulls it away – Generated with Microsoft Copilot Generator

The S&P 500 turned in a solid performance during the trading week ending Friday, 7 June 2024. The index closed up by 1.53 over its previous week's close and even recorded a new record high of 5,354.03 in the middle of the week. It slipped just a bit from that level to close the week at 5,346.99.

The prospects for rate cuts dominated the week's marking-moving headlines. The European Central Bank pulled the trigger on implementing a new series of rate cuts in a move aimed at boosting a weak Eurozone economy, while an unexpectedly "hot" jobs report pushed back the expected timing for when the Federal Reserve will follow suit in the U.S.

The CME Group's FedWatch Tool now projects Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 7 November (2024-Q4), 12 weeks later than expected a week earlier. The tool anticipates the Fed will start a series of 0.25% rate cuts on that date that will occur at 12 week intervals well into 2025.

The latest update of the dividend futures-based model's alternative futures chart shows the S&P 500's trajectory most closely pacing the projection associated with investors focusing their forward-looking attention on 2024-Q4. Which not coincidentally, is the quarter in which the Fed is expected to start a series of rate cuts.

Alternative Futures - S&P 500 - 2024Q2 - Standard Model (m=+1.5 from 9 March 2023) - Snapshot on 7 Jun 2024

The curious thing is investors shifted their attention to 2024-Q4 a week earlier, ahead of the news that moved the FedWatch Tool's projections this week. Speaking of which, here are the past week's headlines:

Monday, 3 June 2024
Tuesday, 4 June 2024
Wednesday, 5 June 2024
Thursday, 6 June 2024
Friday, 7 June 2024

The Atlanta Fed's GDPNow tool's forecast of annualized real GDP growth rate during 2024-Q2 rose to +3.1% from the +2.7% growth anticipated just a week earlier.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon in the style of Charles Schulz featuring Charlie Brown trying to kick a football while Lucy pulls it away". We added the text to create the parody of the Fed pulling away the rate cut football from U.S. markets and tweaked parts of the image to address some of the more peculiar AI-generated artifacts.

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