When it comes to volatility, the last two years have been very quiet ones for the S&P 500 (Index: SPX) .

That realization struck us as we recently updated our volatility statistics for the index. We define "quiet" in terms of the standard deviaton of the day-to-day percentage change in the value of the S&P 500. To qualify as quiet, that day-to-day change has to be less than three-standard deviations, where a single standard deviation represents 0.99% of the index' value. With respect to the S&P 500's long-running mean daily change of 0.036% since 3 January 1950, the index stops being quiet if it either rises by 3.01% or falls by 2.94% in value from the previous day's close.

Since 30 November 2022, the S&P 500 has experienced a total of one "non-quiet" day: 5 August 2024. The S&P dropped by 3.00% on that day, when it was rattled by a sudden crisis caused by a policy mistake by Japan's central bank. Here's how we summarized the story:

The S&P 500 (Index: SPX) got rattled on Monday, 5 August 2024, losing a full three percent of its value in a single day.

That's not a typical day for the index. Before 5 August 2024, there have been just 140 declines greater than 2.94% from previous trading day's closing value recorded since 3 January 1950. Now there are 141.

And yet, after all that sound and fury to start the week, the S&P 500 had almost fully recovered all that it had lost by the end of the week, as if the index had simply gone mostly sideways during the trading week that was. The index ended the trading week at a level of 5,344.16, just 2.4 points less than where it closed the previous week.

The big story of the week came out of Japan, when the combination of the BOJ's surprise rate hike combined with bad jobs data in the U.S. to start unwinding the "carry trade" based on the difference between Japan's low interest rates and higher rates everywhere else.

Markets went on to recover after the Bank of Japan quickly backed off its plans to continue hiking rates to fight inflation developing in Japan. Although it took the rest of the week, as shown in the latest update of the alternative futures chart.

Although the trajectory of the S&P 500 briefly deviated from it in what we'll call the Japan carry trade noise event, an event others describe as a "big ol' nothingburger", the chart indicates stock prices recovered enough to continue falling within the range associated with investors focusing on the distant future quarter of 2025-Q2.

We have to go back to 30 November 2022 to find the previous trading day that qualified as "not quiet". Here's our chart tracking the day-to-day volatility of the S&P 500 since 3 January 1950, with the index' fully updated volatility statistics through 20 November 2024:

How long do you suppose the U.S. stock market's relative period of quiet might last?

References

Yahoo! Finance. S&P 500 Historical Data. [Online Database]. Accessed 20 November 2024.

Image credit: Microsoft Copilot Designer. Prompt: A stock price candlestick chart with positive and negative changes".

The outlook for the S&P 500 (Index: SPX) quarterly dividends per share has continued to improve over the last several weeks.

Beyond simply reporting on that trend, we can now provide a first look at how the index' quarterly dividends payouts are expected to come in throughout each quarter of 2025!

For good measure, we can also show how those expectations have changed since the morning of 5 November 2024. This period coincides with the strongest rally in the S&P 500 in more than a year, which recently saw the index break through the 6,000 level for an all-time high record close.

All these things are shown in the following animated chart, which shows the snapshots we have of the outlook for the S&P 500's dividends on both 5 November 2024 and 15 November 2024.

How changes in the outlook for dividends at specific points of time in the future affects stock prices is described by this math.

More About Dividend Futures Data

For this series, we have been taking a snapshot of the CME Group's S&P 500 quarterly dividend futures data shortly after the second or third week of each month.

Dividend futures indicate the amount of dividends per share to be paid out over the period covered by each quarter's dividend futures contracts, which start on the day after the preceding quarter's dividend futures contracts expire and end on the third Friday of the month ending the indicated quarter. So for example, as determined by dividend futures contracts, the now "current" quarter of 2024-Q4 began on Saturday, 21 September 2024 and will end on Friday, 20 December 2024.

That makes these figures different from the quarterly dividends per share figures reported by Standard and Poor. S&P reports the amount of dividends per share paid out during regular calendar quarters after the end of each quarter. This term mismatch accounts for the differences in dividends reported by both sources, with the biggest differences between the two typically seen in the first and fourth quarters of each year.

Image Credit: Microsoft Copilot Designer. Prompt: "A crystal ball with the word 'SP 500' written inside it". And 'Dividends' written above it, which we added.

Every three months, we take a snapshot of the expectations for future earnings in the S&P 500 (Index: SPX) at approximately the midpoint of the current quarter, shortly after most U.S. firms have announced their previous quarter's earnings.

The index' earnings per share show little change with respect to where they were just three months earlier. We find some minor erosion in 2024-Q4's projected earnings, which dipped from $216.65 per share on 13 August 2024 to $211.67 per share on 13 November 2024.

Meanwhile, there's virtually no meaningful change in Standard and Poor's projections of the S&P 500's earnings per share at the end of 2025-Q4. Here, we see S&P's forecast dipped by a trivial 25 cents per share, from $250.87 in mid-August 2024 to $250.62 in mid-November 2024.

These developments are shown on the following chart:

At this point, we'll observe that it's changes in the outlook for dividends per share, rather than earnings per share, that primarily drives stock prices. The last three months have been characterized by the S&P 500 rising to new record highs, though there has been very little-to-negative changes in its earnings per share outlook. We'll present how the outlook for the S&P 500's dividends per share in the very near future.

Reference

Silverblatt, Howard. Standard & Poor. S&P 500 Earnings and Estimates. [Excel Spreadsheet]. 13 November 2024. Accessed 1 November 2024.

Image Credit: Microsoft Copilot Designer. Prompt: "A crystal ball with the word 'SP 500' written inside it". And 'Earnings' written above it, which we added.

>

The S&P 500 (Index: SPX) definitively broke through the 6,000 level on Monday, 8 November 2024, closing at an all-time record high of 6,001.35 that day.

Unfortunately, by the end of the week, the index fell by 2.2% from that new high to end the week at 5,870.62.

The precipitating event for that drop came on Thursday, 14 November 2024 as Federal Reserve Chair Jerome Powell stated that he saw no need to rush interest rate cuts. That was followed up by similar statements by other Fed officials.

In response to that new information, investors dialed back their expectations for future rate cuts. The CME Group's FedWatch Tool still anticipates a 0.25% cut in the Federal Funds Rate the Fed controls on 18 December 2024, but the odds dropped from a near lock a week earlier to a 62% probability this week. The FedWatch Tool also projects another quarter point rate cut on 19 March 2025, followed by one last one on 17 September 2025, with the Federal Funds Rate bottoming at a target range of 3.75-4.00%.

The result of that change pushed the trajectory of the S&P to the bottom end of the range that would be expected for investors focusing on the distant future quarter of 2025-Q2. The latest update of the alternative futures chart captures the market's response to the news of the Fed's signaling.

The sudden change in the market's trajectory is such that we're now on the lookout for indications a new market regime is setting up. It's too early to make that determination now, but the next several weeks will be important in determining whether the market is simply responding to a short-term noise event or if something more fundamental is changing within it.

Either way, part of that determination relies on the random onset of new information. Here are the past week's market moving headlines:

Monday, 11 November 2024

• Signs and portents for the U.S. economy:
• Oil falls as China stimulus fails to boost sentiment, US dollar strength
• Walmart and major retailers cut back on Christmas holiday imports. Here’s why
• BOJ minions not sure of what direction they want to go, get easily distracted:
• BOJ divided on rate hike timing as U.S. election loomed, Oct summary shows
• BOJ hopes to keep 2% inflation target while monitoring climate shock risks
• ECB minions getting super excited for their next rate cut:
• No reason not to cut rates in Dec as of now, ECB's Holzmann tells paper
• Dow ends session on top while S&P and Nasdaq inch up with CPI data looming
• Benchmark S&P 500 notches shortest time span on record between 1,000-point milestones
• This is how the S&P 500 is expected to finish 2024 as it is up 25% YTD

Tuesday, 12 November 2024

• Signs and portents for the U.S. economy:
• Oil prices hold near 2-week low after OPEC cuts demand view, dollar rises
• Fed minions say they're still turning the screws on the economy, also say lots of liquidity for money markets, want private sector to innovate payments:
• US monetary policy still restrictive, two Fed officials say
• Fed policy is 'modestly restrictive,' Kashkari says
• US banks saw weaker loan demand in the third quarter, Fed survey shows
• NY Fed's Perli still sees ample money market liquidity
• Fed's Waller says private sector should lead on payment system innovation
• Fed's Waller: Stablecoins could bring benefits to financial system
• ECB minions getting excited to deliver more rate cuts, worry about trade with U.S.:
• More ECB rate cuts coming but pace of easing uncertain, Rehn says
• Europe must prepare for new trade war with US, ECB officials warn
• S&P, Nasdaq snap win streaks, Dow ends lower as post-election rally takes a breather
• Record-breaking bitcoin surges towards $90,000 on Trump boost

Wednesday, 13 November 2024

• Signs and portents for the U.S. economy:
• Oct CPI inflation up modestly, as expected
• Oil rebounds slightly on short-covering as strong dollar caps gains
• US East Coast, Gulf Coast port union and employers still at odds over automation
• Fed minions worry they haven't really beaten Bidenflation, may put future rate cuts on the line:
• Fed officials wary of inflation risks as they weigh more rate cuts
• Fed's Schmid: extent of further rate cuts 'remains to be seen'
• Musalem says Fed in 'last mile' of inflation fight, but recent data raise risks
• Fed's Kashkari says he's confident inflation is headed down
• More stimulus developing in China:
• China unveils tax incentives to revive struggling property sector
• BOJ minions upset they might not get to hold interest rates lower:
• Japan's rising wholesale inflation heightens uncertainty on BOJ's rate hike timing
• ECB minions want Eurozone banks to manager risk better, seek to blame others for their pending policy failures as Euro falls in value on their watch:
• ECB wants banks to better manage private equity risk
• ECB's Villeroy: Trump's economic agenda risks global economy, return of inflation
• Why is the euro falling and could it hit $1?
• Dow, S&P, Nasdaq end mixed as post-election rally slows; CPI inflation lifts rate-cut bets

Thursday, 14 November 2024

• Signs and portents for the U.S. economy:
• Oil prices ease on fears of higher output, sluggish demand
• Rising US producer prices add to signs of fading disinflation
• Fed minions say they're doing a good job, don't need to rush on delivering rate cuts, starting to worry about untamed inflation again:
• Fed's Kugler says Fed has made good progress on achieving mandates
• Powell says no need for Fed to rush rate cuts given strong economy
• Fed has time to see what Trump policies mean for the economy, Powell says
• Fed's Powell declines to say if he would remain after chair term expires
• Barkin: Wages, possible tariffs, reasons to be careful about declaring inflation victory
• Bigger trouble developing in Eurozone:
• Euro zone industrial production falls more than expected in Sept
• Euro zone employment ticks up, GDP growth figure confirmed
• Euro zone economy seen hit early next year by Trump tariffs, say economists: Reuters poll
• Wall St indexes end lower after Powell erodes hopes for December rate cut
• Dow, S&P, Nasdaq end lower as Powell signals economic strength lends time to cut rates

Friday, 15 November 2024

• Signs and portents for the U.S. economy:
• Oil prices set for weekly loss on China demand fears
• US import prices unexpectedly rise in October
• US industrial production sags in October amid continued drag from Boeing strike, hurricanes
• Fed minions thinking about either shrinking or taking December rate cut off the table:
• Boston Fed president says December rate cut not a 'done deal', WSJ reports
• Strong US data feeds doubts about Fed December rate cut
• Fed's Collins won't rule out a December rate cut, on Bloomberg TV
• Fed's Collins says tech changes can improve financial system
• Fed's Goolsbee sees another 125 bps of rate cuts by end-2025
• Bigger trouble developing in China:
• China's Oct data shows soft economic underbelly, Trump threat looms large
• China's home prices fall fastest in 9 years, but officials see signs of stabilisation
• BOJ minions get reasons to hold Japan's interest rates lower for longer:
• Japan's economy expands annualised 0.9% in Q3 on tepid capex
• Japan October inflation likely eased, exports picked up: Reuters poll
• Nasdaq slides 2%, S&P, Dow end lower as Powell remarks prompt repricing in rate cuts

The Atlanta Fed's GDPNow tool's projection of the real GDP growth rate for the current quarter of 2024-Q3 was unchanged at +2.5%.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon with a sad Wall Street bull in front of a stock market chart showing a downtrend in an office, and a bear leaving the office holding a box that says 'FUTURE RATE CUTS'". We tweaked some parts of the image to convey the downward shift in the index and to properly label the bear's box.

The biggest math story of 2016 was the failure of political polls to accurately predict the outcome of the U.S. presidential election. Eight years later, they failed again, suggesting the presidential race would be tight and could go in favor of either candidate. It wasn't.

Expecting a tight race, political fanatics watching established mainstream news outlets for the latest election returns were in for a long night. The slow pace at which states reported their results meant it would be hours after the polls closed before these observers would have any good sense of which candidate won the race.

But election watchers in Las Vegas had a very different election night experience. Kalshi, the only prediction market in which Americans could directly bet on who would win the U.S. presidential race, took out massive electronic billboard ads providing real-time updates on the market's prediction of who would win the race in Las Vegas. Because they did, everyone within sight of these billboards, or for that matter, anyone with a mobile device who could access Kalshi's elections web site for the race, knew early in the evening of 5 November 2024 that Donald Trump was very much on track to beat Kamala Harris to win the election. The die had been cast.

By the time our lead photo was taken the following morning, the final results of the election die toss were clear. The odds had swung and they swung decisively. Even though many states were still reporting election results, Kalshi's prediction market outperformed both the polls and the official reporting of election results to confirm Donald Trump had locked up a sweeping victory hours before it became official. What's more, Americans who had put money on a Trump victory in the prediction markets won money. The following chart shows how Kalshi's odds for each candidate changed throughout the election before being effectively settled shortly after election day voting ended in the western United States.

Kalshi's 2024 U.S. presidential prediction market begins in early October 2024 because the firm only won the right to operate its prediction market in the U.S. on 2 October 2024, following an year-long legal battle with the U.S. Commodity Futures Trading Commission who blocked it from operating in September 2023.

The success of prediction markets in anticipating the outcome of the 2024 U.S. presidential election raises several good questions, starting with "what is a prediction market?" Robin Hanson's 18-minute video introduction to prediction markets provides an excellent overview of the ideas behind what they are and how they work:

Prediction markets can deliver superior performance because they directly address many of the inherent shortcomings of traditional political polling. While not perfect, they represent a significant advance over the kind of political polling that has repeatedly come up short in accurately predicting major election outcomes during the past eight years.

There's more to the story of prediction markets, particularly with the best known one, Polymarket, which is still making headlines for reasons other than its success in anticipating the outcome of the U.S. elections. We opted to focus on Kalshi for this article because its operator cleared the hurdles needed to operate in the U.S. during the 2024 election.

We predict prediction markets will be much more visible when the 2028 election rolls around. If their success continues, they may very well replace traditional political polling.