The dividend outlook for the S&P 500 (Index: SPX) in 2023 continued to improve. Combined with recent upward momentum, the index closed at 4,070.56, some 13.5% above its 12 October 2022 bottom, but still 15.1% below its 3 January 2022 record high peak.

Here's the latest update for the alternative futures chart, which indicates stocks running to the high side of the redzone forecast range. That level is consistent with investors focusing on the current quarter of 2023-Q1 in setting stock prices.

The dividend outlook in 2023 has continued to improve over the last two weeks. Here's the latest from the CME Group's S&P 500's quarterly dividend futures:

Meanwhile, the upcoming Federal Reserve's Open Market Committee meeting this week helps account for why investors are so focused on the current quarter of 2023-Q1, where the market-moving headlines point to expectations of a quarter point rate hike. The Federal Funds Rate is also currently projected to top out on or by the conclusion of the Fed's March 2023 meeting. Here are the past week's headlines:

Monday, 23 January 2023

• Signs and portents for the U.S. economy:
• U.S. leading indicators index falls for 10th straight month
• Fed minions want to stop subsidizing mortgage rates:
• Fed needs mortgage-backed securities exit plan 'earlier than later,' George says
• JapanGov minions going into crisis management mode while BOJ minions fiddle around:
• Japan warns of dire finances as BOJ struggles to contain yields
• ECB minions' messaging a mess with rate hikes on tap:
• European Central Bank to raise deposit rate to 3.25% by mid-year
• ECB policymakers spar on rate outlook beyond Feb hike
• ECB rates have to rise significantly at steady pace, Lagarde says
• Analysis-ECB seen struggling to keep market on side after mixed messages
• Wall Street extends rally, powered by tech bounce

Tuesday, 24 January 2023

• Signs and portents for the U.S. economy:
• OPEC+ panel unlikely to tweak oil policy at Feb. 1 meeting, sources say
• U.S. oil & gas M&A hit 17-year low; big firms dominate deals-report
• U.S. business activity still soft in early 2023, but outlook perks up
• Better than expected signs in the Eurozone:
• Euro zone business activity back to growth in January -PMI
• Pressures ease though German economy still shy of growth -flash PMI
• Pickup in French manufacturing offers hope as services sector still weak -flash PMI
• Bigger trouble developing in Japan:
• Japan's factory activity extends declines for third straight month - PMI
• Wall Street edges lower as earnings kick into high gear

Wednesday, 25 January 2023

• Signs and portents for the U.S. economy:
• Oil prices steady after smaller-than-expected U.S. crude build
• Analysis-Wall Street heavyweights warn of pain ahead despite market’s recent reprieve
• Central bankers still hiking rates:
• Bank of Canada hikes rates, becomes first major central bank to signal pause
• Exclusive-Bank of Canada's Macklem says he is 'not even thinking' of cutting rates
• Thai central bank raises key rate as economy recovers, flags further hikes
• Australia inflation surges further in Q4, more rate hikes loom
• BOJ minions getting ready for new management:
• Japan PM Kishida to pick new BOJ chief while monitoring economy
• Japan cuts economic view as exports to Asia weaken
• ECB minions excited to keep rate hikes going:
• ECB's Nagel, Makhlouf flag interest rate rises beyond March
• S&P 500 closes slightly red as weak corporate guidance fuels recession fears
• NYSE says manual error triggered major trading glitch

Thursday, 26 January 2023

• Signs and portents for the U.S. economy:
• Oil settles up 2% on strong U.S. data, China reopening
• U.S. economy posts strong growth in Q4, but with underlying weakness
• Bigger trouble developing in Asia:
• South Korea vows support for exporters as economy shrinks
• BOJ minions not sure which direction to turn, but ready to keep never-ending stimulus alive:
• BOJ policymakers divided on wage, inflation outlook, Jan meeting summary shows
• Borrowing to drive Japan's debt over 1,100 trillion yen for first time -draft
• Wall Street closes green as GDP data eases recession worries

Friday, 27 January 2023

• Signs and portents for the U.S. economy:
• Oil prices settle lower on stronger supply outlook
• U.S. consumer spending ends 2022 on weaker footing; inflation slowing
• Fed minions expected to stop hiking rates in March 2023:
• Fed seen ending rate hikes by March as inflation slows
• Bigger trouble developing in the Eurozone:
• Euro zone lending growth tumbles as higher rates bite
• Rising interest rates have a sting in the tail for Europe's banks
• ECB rejects banking sector call for lower capital to boost lending
• BOJ minions busy keeping never-ending stimulus alive despite inflation:
• BOJ deploys funds-supply tool again as yields creep up
• Consumer inflation in Japan's capital hits near 42-year high, keeps BOJ under pressure
• Japan PM says can't rule out return of deflation despite price spike
• Wall Street ends higher, notches weekly gains as Fed meeting looms

The CME Group's FedWatch Tool still projects quarter point rate hikes at both the Fed's upcoming 1 February and 22 March (2023-Q1) meetings, with the latter representing the last for the Fed's series of rate hikes that started back in March 2022. The FedWatch tool then anticipates the Fed will hold the Federal Funds Rate at a target range of 4.75-5.00% through September 2023. After which, developing expectations for a U.S. recession in 2023 have the FedWatch tool projecting a quarter point rate cut in November (2023-Q4).

The Atlanta Fed's GDPNow tool's first projection for real GDP growth in the first quarter of 2023 is +0.7%, which would be a decline from the BEA's first estimate of 2.9% real GDP growth in the fourth quarter of 2022. GDPNow's final projection for real GDP growth in 2022-Q4 was 3.5%. We'll find out in a couple of months how close they got.

The S&P 500 (Index: SPX) ended the week down 26.48 points from the previous Friday, closing at 3,972.61.

In between the two Fridays, the index dipped and recovered, but otherwise experienced an uneventful week.

We find the level of the S&P 500 is consistent with investors holding their focus on 2023-Q1, which itself is consistent with the expecting timing of the peak of the Federal Reserve's ongoing series of rate hikes. Meanwhile, here are the week's not-so market moving headlines, which reinforce why investors are holding their focus on the current quarter of 2023-Q1:

Tuesday, 17 January 2023

• Signs and portents for the U.S. economy:
• Oil prices hit two-week highs on hopes of China demand rebound
• U.S. household spending gains moderated in December, NY Fed says
• New York state manufacturing plunges in January
• Fed minions suddenly gripped by grasp of the obvious:
• Barkin: Terminal rate for Fed depends on path of inflation -Fox Business
• Fed's Williams: Making economy inclusive has benefits for overall activity
• Bigger trouble developing in China:
• China's 2022 economic growth one of the worst on record, post-pandemic policy faces test
• China's 2022 property investment falls for first time since 1999
• China developers' debt risks persist after support policies' slow start
• China Dec industrial output up 1.3%, retail sales down 1.8%
• Less trouble than expected developing in the Eurozone:
• German economy expected to contract slightly in 2023 - BDI
• German economy minister: recession threatening Europe manageable
• BOJ minions rethinking never-ending stimulus policies:
• Japan's yield control faces biggest test to date as BOJ debates policy
• Marketmind: BOJ's moment of truth
• Column-Bank of Japan shift exposes global bond cracks: McGeever
• ECB minions thinking about smaller rate hikes:
• European shares close up after report says ECB considering smaller rate hikes
• Goldman, Travelers drag Dow lower as earnings season picks up

Wednesday, 18 January 2023

• Signs and portents for the U.S. economy:
• U.S. mortgage interest rates fall to lowest levels since September - MBA
• Heavy slate of U.S. oil refinery overhauls to crimp fuel output
• U.S. retail sales post biggest drop in a year; inflation retreating
• U.S. holiday sales miss estimates as inflation weighs on demand - NRF
• U.S. firms pessimistic about economic growth this year, Fed survey shows
• U.S. manufacturing output tumbles in December
• Fed minions say 5% and/or bust, ready for smaller rate hikes, and that Fed has no problems from how its structured:
• Fed policymakers call for target interest rate above 5% to beat inflation
• Fed's Harker says ready to downshift to 25-basis-point rate hikes
• Fed's Bullard urges colleagues not to "stall" on remaining rate increases
• Fed's current structure has boosted public confidence, George says
• BOJ minions have their hands full sustaining never-ending stimulus:
• Bank of Japan keeps yield control policy unchanged
• Yen lower as BOJ sticks to ultra-easy policy, losses trimmed
• Analysis-Japan's yen feels the heat from hard-line BOJ policy
• Quotes: BOJ Governor Kuroda's comments at news conference
• Analysis-BOJ has markets bracing for more bond, FX turmoil as shift seen inevitable
• ECB minions long for days of 2% inflation:
• ECB's Villeroy reaffirms determination to get inflation down to around 2% -Bloomberg TV
• Wall St closes lower after weak data, hawkish Fed comments
• In 2022 inflation data trumped Fed comments for moving markets, report says

Thursday, 19 January 2023

• Signs and portents for the U.S. economy:
• https://www.reuters.com/article/usa-economy-kemp/column-u-s-manufacturing-has-probably-entered-recession-kemp-idUSKBN2TY1J7
• U.S. labor market still tight; housing mired in recession
• U.S. hits debt ceiling amid standoff between Republicans and Democrats
• U.S. debt limit negotiations to take time, but agreement expected -Moody's
• Oil prices rally to highest close since Dec. 1 on China optimism
• Fed minions, U.S. big bank trying hard to sell higher than 5% interest rates, Fed minions claims they'll deliver 'soft landing' recession:
• Fed 'probing' for right rate level as prospects rise for 'soft landing'
• Fed's Collins sees U.S. interest rate hike peak "just above" 5%
• JPMorgan CEO Dimon sees interest rates going beyond 5% - CNBC
• Fed's Brainard says data may be aligning for 'soft landing' scenario
• Post-Zero-Covid lockdown recovery, more stimulus developing in China:
• Chinese companies set for biggest earnings growth in 5 years in 2023-Refinitiv data
• COVID-hit Chinese factories eye gradual recovery after Lunar New Year break
• China seen keeping benchmark lending rates unchanged for fifth month
• Signs of bigger trouble still developing in China:
• Slumping China-bound Japanese exports raise fears of global downturn
• Central bank minions signal they're mostly done with rate hikes:
• Indonesia central bank signals end of rate hike cycle as inflation cools
• Taiwan central bank debated larger rate hike, minutes show
• BOJ minions thinking about ending never-ending stimulus:
• BOJ may raise yield cap again by mid-year, says academic Ito
• Analysis-BOJ bullishness on wages suggests days of super-low rates are numbered
• ECB minions thinking more about bigger rate hikes:
• ECB pushes back against bets on smaller rate hikes
• Wall St slips as labor market data fuels Fed worry

Friday, 20 January 2023

• Signs and portents for the U.S. economy:
• Oil settles up more than 1% on China demand outlook, second weekly gain
• U.S. home sales drop to 12-year low; price growth cools
• Fed minions signal smaller rate hike ahead:
• Fed's Waller, citing "good news," backs quarter-point increase at next meeting
• Fed can likely slow runoff as bank reserves near 10% to 11% of GDP
• Bigger trouble developing because of China:
• China reopening will add to global inflationary pressures, ECB's Lagarde says
• Central bank rate hikes expected to sputter out:
• Smaller Fed rate hike may augur end to 'ongoing' increases
• BoC to raise rates by 25 bps to peak of 4.50% on Jan. 25: Reuters poll
• BOJ minions determined to keep never-ending stimulus alive despite inflation:
• BOJ's Kuroda vows to keep ultra-loose policy
• BOJ may have crafted new tool for post-YCC era - analyst
• Explainer-How the BOJ's new yield-controlling tool works
• Japan's consumer inflation hits fresh 41-year high, keep BOJ in focus
• Tokyo core inflation likely double BOJ's 2% target in January: Reuters Poll
• ECB minions signal more half point rate hikes ahead:
• ECB's Holzmann expects at least two rate increases in H1 -newspaper
• Wall Street rallies to end higher on Alphabet, Netflix lift

The CME Group's FedWatch Tool continues to project quarter point rate hikes at both the Fed's upcoming 1 February and 22 March (2023-Q1) meetings, with the latter representing the last for the Fed's series of rate hikes that started in March 2022. The FedWatch tool then anticipates the Fed will hold the Federal Funds Rate at a target range of 4.75-5.00% through September 2023. After which, developing expectations for a U.S. recession in 2023 have the FedWatch tool projecting quarter point rate cuts in both November and December (2023-Q4).

The Atlanta Fed's GDPNow tool's latest projection for real GDP growth in the fourth quarter of 2022 dropped +3.5% from last week's +4.1% estimate. Meanwhile, the so-called "Blue Chip" consensus forecast anticipates a +1.7% growth rate. The BEA will issue its first estimate of 2022-Q4's GDP later this month, on Thursday, 26 January 2023.

We're seeing a remarkable change in investors' expectations for 2023's dividends for the S&P 500 (Index: SPX). The outlook for quarterly dividends has brightened considerably from the outlook we featured just a few weeks ago. Instead of falling year-over-year from the levels recorded in 2022, the CME Group's quarterly dividend index futures are now projecting they'll show positive gains with respect to last year's results for all but the fourth quarter at this writing.

The following chart shows the expectations for the S&P 500's quarterly dividends per share as of Friday, 13 January 2022.

That change in expectations for dividends has boosted the outlook for stock prices through the first quarter of 2023. The dividend futures-based model is now projecting a more positive trajectory for stock prices, as indicated by the slightly upward slope of the redzone forecast range indicated on the latest update for the alternative futures chart.

Also during the past week, investors shifted more of their attention toward the current quarter of 2023-Q1. The S&P 500 ended the trading week at 3,999.09, rising to the high side of the redzone forecast range. That change is consistent with how we described stock prices would behave in that scenario in the previous edition of the S&P 500 chaos series.

How long might that last? That remains to be seen, but you can see some of the positive change in sentiment in the week's market-moving headlines, where expectations strengthened that the Fed's nearly year-old series of rate hikes will come to an end in this current quarter.

Monday, 9 January 2023

• Signs and portents for the U.S. economy:
• Oil jumps 3% on demand optimism as China borders reopen
• Analysis-Some ocean shipping rates collapsing, but real price relief is months away
• Fed minions looking ahead to next rate hike:
• Fed to size up next rate hike with eye on inflation
• Bigger stimulus developing in China:
• China central bank to support private firms, ease tech crackdown - CCTV
• ECB minions have wage inflation, slowing Eurozone economy to worry about:
• ECB sees 'very strong' wage growth ahead in next few quarters
• Around 40% of German companies expect output decline in 2023 - IW institute
• S&P 500 near flat as investors weigh chances of less aggressive rate hikes

Tuesday, 10 January 2023

• Signs and portents for the U.S. economy:
• U.S. small-business sentiment skids to half-year low
• U.S. imports of containerized goods retreat to pre-pandemic level
• U.S. banks get ready for shrinking profits and recession
• U.S. wholesale inventories rise strongly in November as demand falters
• Oil edges higher as petroleum demand set to touch record next year
• Fed minions don't want to get involved in social policy:
• Powell: Fed needs independence to fight inflation, should avoid social policy
• Bigger trouble developing in Japan:
• Japan Nov household spending unexpectedly falls 1.2% year/year
• Consumer inflation in Japan's capital exceeds BOJ target for 7th month
• Bigger stimulus rolling out in China:
• China Dec new bank loans beat forecast, 2022 lending at record high
• ECB minions thinking they should stop rate hikes:
• ECB's Centeno: we are approaching the end of the interest rate rise process
• Wall St ends higher, Powell comments avoid rate policy

Wednesday, 11 January 2023

• Signs and portents for the U.S. economy:
• Oil gains 3% on global economic optimism, despite surprise U.S. crude build
• Fed minions signal smaller rate hikes ahead:
• Fed's Collins leans toward quarter-point rate increase -NYT
• Bigger stimulus developing in China:
• China central bank steps up short-term liquidity injection ahead of long holiday
• Milder recession developing in Eurozone:
• Low use of shortened work hours points to mild German recession - Ifo
• Bigger trouble developing all over:
• World Bank warns global economy could tip into recession in 2023
• BOJ minions looking forward to fighting higher inflation:
• BOJ's 2% inflation target can be tweaked to 'range', deputy governor candidate says
• ECB minions excited about keeping rate hikes going:
• ECB's Villeroy sees rate hikes at a 'pragmatic pace' in coming months
• ECB will keep raising rates 'significantly' at sustained pace, De Cos says
• Stocks rally, bond yields fall with bets on easing U.S. inflation

Thursday, 12 January 2023

• Signs and portents for the U.S. economy:
• Oil rises over 1% on China demand hopes, U.S. inflation in focus
• U.S. inflation retreating as consumer prices fall; labor market still tight
• Instant View: U.S. consumer prices fall in December
• Fed policymakers signal rate-hike slowdown coming, but no easing
• Fed's Bullard says latest inflation data step in right direction
• Fed's Harker ready to downshift to 25 basis-point interest rate hikes
• Bigger trouble, stimulus developing in China:
• China's exports seen cooling further in December on weak global demand, COVID woes- Reuters poll
• China consumer inflation accelerates in Dec; PPI falls with soft demand
• China growth seen rebounding to 4.9% in 2023, more stimulus on the cards - Reuters poll
• BOJ minions starting to wonder if never-ending stimulus has unintended consequences, feel more upbeat:
• BOJ to review side-effects of massive easing at next week's meeting -Yomiuri
• BOJ faces further test to its yield control as inflation creeps up
• BOJ more upbeat on regional Japan, wage prospects
• Wall St ends up as data suggests inflation may be on downward trend

Friday, 13 January 2023

• Signs and portents for the U.S. economy:
• Oil posts biggest weekly gain since October on China hopes, dollar slump
• Yellen warns of U.S. default risk by early June, urges debt limit hike
• Fed minions losing money, say they're balancing risks:
• Fed says surging interest costs cut what it handed back to Treasury in 2022
• Fed's Powell noted "balance of risks" in rate hike path from 2018 onwards, transcripts show
• Bigger trouble, stimulus developing in China:
• China Dec coal imports slip as COVID spike dampens industrial activity
• China central bank to maintain or increase policy-loan liquidity - Reuters poll
• Better than expected, but still bad, economic news for the Eurozone:
• German economy likely stagnated in Q4, escaping recession for now
• Central bankers signal they're ready to stop hiking rates:
• Bank of Korea raises interest rates, hints they will now be steady
• BOJ minions rethinking never ending stimulus as Japanese inflation doubles their target:
• BOJ may tweak yield control this year if wage hikes broaden - ex-central bank official
• Japan Dec core CPI tipped at 41-year-high 4.0%, twice BOJ's 2% target - Reuters poll
• ECB minions readying for next rate hike, start gearing up for recession impact:
• ECB's Kazaks pushes back on rate cut bets as core prices rise
• ECB tells bankers to get picky with risky clients, including hedge funds
• S&P 500 ends at highest in month, indexes gain for week as earnings kick off

The CME Group's FedWatch Tool continues to project quarter point rate hikes at both the Fed's upcoming 1 February and 22 March (2023-Q1) meetings, with the latter representing the last for the Fed's series of rate hikes that started in March 2022. The FedWatch tool then anticipates the Fed will maintain the Federal Funds Rate at a target range of 4.75-5.00% through November 2023. After which, developing expectations for a U.S. recession in 2023 have the FedWatch tool projecting a quarter point rate cut in December (2023-Q4). Or rather, no change at all from last week!...

We did see change for the Atlanta Fed's GDPNow tool's latest projection for real GDP growth in the fourth quarter of 2022, which increased to +4.1% from last week's +3.8% estimate. The BEA will issue its first estimate of 2022-Q4's GDP later this month, on 26 January 2023.

The first week of trading in 2023 saw the S&P 500 (Index: SPX) rise 1.4% over where it ended 2022, closing the week at 3,895.08.

That rise was assisted by the first Lévy flight event of 2023, as investors shifted their forward-looking attention back to the current quarter of 2023-Q1 from 2023-Q2. The first look at the alternative futures chart for 2023-Q1 shows that recent development.

That shift continues the chaotic volatility that characterized 2022, which saw no fewer than 15 Lévy flights prompted as investors shifted their forward-looking focus from one point of time in the future to another. Like those events, the first Lévy flight event of 2023 was prompted by changing expectations for how the U.S. Federal Reserve will be setting interest rates in the months ahead. During the past week, investors' time horizon pulled back in toward the current quarter of 2023-Q1 as new information about the state of the U.S. economy brought with it the expectation this quarter will see the last of the Fed's ongoing series of rate hikes.

Here are the market moving headlines from the week that was that summarize the new information investors absorbed:

Tuesday, 3 January 2023

• Signs and portents for the U.S. economy:
• U.S. construction spending rebounds in November
• Oil dives 4%, trade choppy on worries about China, global economy
• Bigger trouble developing in Asia:
• China Dec manufacturing contracts sharply as COVID infections soar
• South Korea Dec factory activity weakens on demand slump, trucker strike - PMI
• Trouble not as bad as expected in Eurozone:
• Darkest days likely over for euro zone factories, Dec PMIs show
• Fading supply problems ease downturn in German manufacturing -PMI
• French manufacturing contraction not as deep as forecast in Dec - final PMI
• Bigger stimulus still developing in China:
• China's finance minister promises 'appropriate' 2023 fiscal expansion
• China seeing some positive economic signs after lifting failed zero-COVID policy:
• China's holiday home sales rise 27.1% y/y - private survey
• Wall St starts the year with a dip; Apple, Tesla shares drag

Wednesday, 4 January 2023

• Signs and portents for the U.S. economy:
• U.S. manufacturing sector contracts, prices decline in December-ISM
• Oil falls more than 5% on global economy worry, China COVID cases
• Fed minions fear Americans think they'll pivot from fighting inflation to fighting recession:
• FOMC in Dec worried about "misperception" that inflation fight flagging
• Kashkari sees Fed's target interest rate peaking at 5.4%
• Fed officials offering less confidence reverse repo usage will shrink
• Fed wants 'flexibility' on rates as inflation remains key focus, minutes show
• Bigger trouble developing in Japan, BOJ minions want to continue never-ending stimulus, JapanGov minions want more stimulus:
• Japan Dec factory activity posts sharpest fall in more than 2 years -PMI
• BOJ's Kuroda aims to keep policy loose to meet price, wage growth goals
• Japan's Kishida, central bank governor pressure firms for higher pay
• Eurozone recession may not be as deep as feared:
• Euro zone recession may not be as deep as expected -PMI
• Decline in German services sector eases, raising hopes for milder recession -PMI
• Surprise French inflation drop adds to signs Europe prices are cooling
• S&P closes higher after Fed minutes confirm inflation focus

Thursday, 5 January 2023

• Signs and portents for the U.S. economy:
• Oil rises after U.S. fuel stocks draw down; economic concerns loom
• U.S. trade deficit shrinks sharply as imports tumble
• Fed minions say economy won't crash into recession, will keep rates high to fight inflation:
• Fed's Bullard says prospects for a U.S. soft landing are rising
• Fed's George: It will be key to hold rates up once hikes end
• Fed's Bostic: Officials "remain determined" to beat inflation
• Bigger trouble developing in China:
• China's Dec services sector extends declines as COVID cases surge - Caixin PMI
• BOJ minions
• BOJ's policy tweak hasn't led to lending windfall, Mizuho head says
• Japan's output gap closes in positive sign for economy, BOJ
• Japan's Nov real wages fall most in 8 years, defying BOJ objective
• Japan PM Kishida urges faster wage hikes to avoid stagflation
• Wall St drops more than 1% with jobs data feeding fears of more Fed tightening

Friday, 6 January 2023

• Signs and portents for the U.S. economy:
• U.S. job growth solid in December; wage growth slows
• Oil settles flat, with weekly decline on recession worries
• U.S. factory orders tumble in November on aircraft
• U.S. service sector contracts in December, price increases slow - ISM survey
• Fed minions say slower rate hikes are okay going forward as economy slows, blame Chinese government's zero-COVID policies for supply chain problems:
• Fed will face complicated choices as labor market softens: George
• Fed's more gradual rate hike path should limit economic harm, Barkin says
• Fed's Bostic: jobs data another sign economy is gradually slowing
• NY Fed says China's COVID woes are pressuring supply chains
• Bigger stimulus developing in China:
• China property set for modest demand recovery in 2023 on policy support
• China property shares firm on more policy support, easing curbs
• China establishes mortgage rate adjustment mechanism for some home buyers
• China says to stabilise, expand automotive industry consumption
• ECB minions hint they're done with rate hikes if inflationary shocks stop:
• ECB's Centeno says interest rate close to peaking if no new shocks
• Big fall in euro zone inflation offers little help for ECB
• Wall St rallies as jobs, services data calm rate hike worries

The CME Group's FedWatch Tool continues to project quarter point rate hikes at both the Fed's upcoming 1 February and 22 March (2023-Q1) meetings, with the latter representing the last for the Fed's series of rate hikes that started in March 2022. The FedWatch tool then anticipates the Fed will maintain the Federal Funds Rate at a target range of 4.75-5.00% through November 2023. After which, developing expectations for a U.S. recession in 2023 have the FedWatch tool projecting a quarter point rate cut in December (2023-Q4).

The Atlanta Fed's GDPNow tool's latest projection for real GDP growth in the fourth quarter of 2022 rose a notch to +3.8% from last week's +3.7% estimate. The BEA will issue its first estimate of 2022-Q4's GDP later this month, on 26 January 2023.

Going back to the new alternative futures chart, we've added a redzone forecast range to represent where the trajectory of the S&P 500 is likely to go based on the assumption that investors will be progressively shift their forward-looking focus from 2023-Q1 to 2023-Q2 during the next 10 weeks. That assumption itself is almost certainly wrong, simply because in all likelihood, stock prices will be more volatile than the redzone forecast range suggests. We think it may still be useful however because it provides a frame of reference for telling which quarter investors are focusing upon as they reach to the random onset of new information. During the next six weeks or so, the level of the S&P 500 running above the centerline of the range will indicate investors are focusing mainly on 2023-Q1, while running below the centerline would indicate 2023-Q2 is where they've set their time horizon.

Looking beyond 2023-Q1, we're afraid that we'll be adding multiple redzone forecast ranges to the alternative future charts throughout 2023 to compensate for the effect of past stock price volatility on the projections of the dividend futures-based model. The model uses historic stock prices as the base reference points for its forecasts, where its raw projections are affected by the echoes of past volatility. Given 2022's high level of volatilily, that's to be expected and will be one of the major challenges we face in analyzing the behavior of stock prices this year.

After starting at its all time record high, the S&P 500 (Index: SPX) dropped into bear territory in 2022, spending much of the time during the year bouncing around the 20% decline threshold that defines bear territory. The last two weeks of the year were no different, with the index closing out 2022 right at the bear territory threshold.

The final update to the alternative futures chart for 2022-Q4 shows the index experienced one more Lévy flight event in 2022, with investors shifting their forward looking focus from 2023-Q1 outward to the more distant future quarter of 2023-Q2.

Given the closeness of the dividend futures-based model's projections for 2023-Q2, 2023-Q3, and 2023-Q4, it's possible investors have shifted their attention to more distant future quarters. But with the actual trajectory of the S&P 500 still within the range of values we would expect it to be for investors focusing on 2023-Q2, we cannot yet rule that possibility out.

Not that it would take long to get that picture sorted out. The market moving headlines of the last two weeks point to the expected timing of the peak of the Fed's series of rate hikes (2023-Q2) and the increasingly expected arrival of recession in the second half of 2023 as the factors that will set how far forward in time investors set their time horizons. Here are the headlines:

Monday, 19 December 2022

• Signs and portents for the U.S. economy:
• Oil rises on hopes for China's economy; recession fears limit gains
• U.S. home builder gloom persists, but some hope seen for next year
• Fed minions trying to sell "recessionish" as a real adjective:
• Recession, or recession-ish? Fed outlook for U.S. walks a fine line
• Bigger trouble developing in Asia, Australia, Africa:
• Chinese business confidence falls to lowest in almost a decade on COVID
• China's COVID surge hits Beijing trading floors, Shanghai finance hub
• China Nov aluminium imports fall amid rising domestic supply
• Taiwan's export orders seen contracting at faster pace in Nov- Reuters poll
• South Korea flags economic slump deepening for while
• Australia's housing crisis, largely hidden, is getting worse
• Ghana to default on most of external debt as economic crisis worsens
• BOJ minions may be forced to end never-ending stimulus:
• BOJ may unwind ultra-easy policy in 2023, nearly half of economists say: Reuters poll
• Japan to consider revising Abe-era deflation fighting mandate - sources
• Ex-BOJ Nakaso sees Japan lagging in exiting stimulus due to weak economy, wages
• ECB minions worried ECB may lose more credibility:
• ECB's de Guindos says changing inflation goal will hurt credibility
• ECB's strong policy response needed for next half year, Kazimir says
• ECB's Nagel pleads with Germans for patience in combating inflation
• Wall St posts fourth straight drop, Treasury yields rise as recession fears weigh

Tuesday, 20 December 2022

• Signs and portents for the U.S. economy:
• Oil prices settle higher on weak dollar, worries U.S. winter storm could cut travel
• Private debt markets face reality check as companies grapple with rising rates, recession
• Higher mortgage rates depress U.S. single-family housing starts, building permits
• U.S. feeling impact of China COVID changes, can 'power through it' -Treasury's Adeyemo says
• Fed minions say consumer cost of renting is rising more slowly:
• New Cleveland Fed data points to easing shelter inflation outlook
• Better than expected economic news in the Eurozone:
• German producer prices rise less than expected in November
• Sentiment among German exporters brightens for third month in a row - Ifo
• There should not be any 'crash' in French and European economy - ECB's Villeroy
• Bigger trouble developing in China:
• World Bank cuts China growth outlook on COVID, property woes
• Taiwan Nov export orders plunge, China's COVID surge clouds outlook
• BOJ minions dial back a small portion of never-ending stimulus:
• BOJ jolts markets in surprise change to yield curve policy
• Instant View: Bank of Japan makes surprise policy tweak
• Yen soars to 4-month peak after surprise BOJ policy tweak
• Analysis-Bank of Japan gives an inch, investors ready to claim a mile
• Marketmind: Asia reels from BOJ shock
• Wall St closes slightly higher after four-day sell off

Wednesday, 21 December 2022

• Signs and portents for the U.S. economy:
• U.S. consumer confidence rebounds; existing home sales sink
• U.S. existing home sales fall for 10th straight month in November
• Oil prices rise over $2 on drawdown in U.S. crude stocks
• U.S. new vehicle sales to fall in December as high prices deter buyers - report
• Bigger trouble developing in China:
• Corporate China struggles with supply snags, demand slump as COVID cases spread
• BOJ minions "shock" move may signal beginning of end of never-ending stimulus:
• Analysis-Kuroda's abrupt policy tweak opens door for bigger shift next year
• Analysis-Japanese insurers likely to provide tailwind to yen as BOJ shifts
• Wall Street advances with help from Nike, FedEx and consumer sentiment
• FedEx promises more aggressive cost cuts; shares rise
• Nike shares surge as inventory challenges start to abate, demand stays strong
• Weary Wall Street cheers improved consumer confidence

Thursday, 22 December 2022

• Signs and portents for the U.S. economy:
• Oil falls by $1/bbl as rate hike fears outweigh tighter U.S. stockpiles
• Low weekly jobless claims underscore U.S. labor market tightness; Q3 growth revised up
• The whack-a-mole economy: U.S. manufacturers struggle with unpredictable supplies
• Factbox: Corporate America lays off thousands as recession worries mount
• Micron Joins Intel, Other Chipmakers to Lay Off Thousands of Workers Despite Billions in Federal Subsidies
• Fed minions shocked at inflated jobs data, aren't expected to shrink balance sheet for long:
• Missing jobs mystery puts Fed on back foot
• Analysis-Fed's balance sheet drawdown could sunset next year
• Bigger trouble developing in the Eurozone:
• Sweden faces recession lasting into 2024, finance minister says
• French inflation will be high in coming months before easing in mid-2023 -Le Maire
• Analysis-Euro zone governments must court private buyers for mountain of debt
• ECB minions thinking about keeping rate hikes going:
• ECB's might raise interest rates at current pace for a while - ECB's de Guindos
• Wall Street tumbles on rate, recession worries, bleak chipmaker outlook
• Micron sets 10% job cuts in 2023 due to 'supply-demand mismatch'
• Nvidia, AMD, and Lam Research Slide After Micron Disappoints

Friday, 23 December 2022

• Signs and portents for the U.S. economy:
• Oil rises $3/bbl after Russia signals output cut due to price cap
• IRS delays $600 income reporting rule for U.S. gig workers
• U.S. consumer spending, inflation rise moderately amid rate hikes
• U.S. consumers' 1-year inflation outlook drops to 18-month low - UMich
• U.S. new home sales increase again in November
• Bigger stimulus developing in China:
• China cbank makes biggest weekly cash injection in two months
• Central bank minions give each other high fives all around:
• Global central banks deliver historic rate hike blast in 2022
• Fiscal stimulus rolling out in Japan as factories slow and inflation hits 40-year high:
• Japan unveils record budget in boost to military spending
• Japan Nov factory output likely down for 3rd month on global demand woes- Reuters poll
• Japan's consumer inflation hits fresh 40-year high, eyes on BOJ policy
• Wall Street ends up as investors eye data for rate prospects, energy outperforms

Tuesday, 27 December 2022

• Signs and portents for the U.S. economy:
• Oil steady as U.S. output ramps up after freeze, China eases COVID curbs
• Double-digit U.S. home price growth streak skids to an end
• Bigger trouble, stimulus developing in China:
• China's industrial profits slump on COVID fallout, next year seen improving
• China to step up financial support to COVID-hit catering, tourism sectors
• Smaller trouble developing in the Eurozone:
• German businesses expect only mild recession as disruptions ease
• Nearly three in five German industry associations foresee gloomy 2023
• S&P 500, Nasdaq close lower, weighed by growth stocks
• Tesla, megacap growth stocks pull Nasdaq lower; Dow rises

Wednesday, 28 December 2022

• Signs and portents for the U.S. economy:
• Oil settles lower in light trading on China demand concerns
• U.S. pending home sales sag more than expected in November
• Bigger trouble developing in Japan, BOJ minions debating what they'll do in 2023, JapanGov minion wants higher wages to keep up with inflation:
• Japan Nov factory output falls on weakening global demand
• BOJ debated rising wages, fading deflation risks at Dec meeting
• Japan's Nakao sees smoother path for Kuroda's successor with BOJ policy shift
• Ex-BOJ deputy Yamaguchi emerging as next central bank head contender -Sankei
• Japan to make raising wages a top priority, says senior govt official
• Bigger trouble still developing in China:
• South Korea Dec exports to fall for third month as China demand still weak- Reuters poll
• U.S. stocks end lower on mixed economic data, recession fears
• Wall St reverses gains as energy, growth shares drag
• Five days that killed the year': These trading sessions accounted for 95% of the S&P 500's losses in 2022

Thursday, 29 December 2022

• Signs and portents for the U.S. economy:
• Oil weakens on China uncertainty, U.S. demand keeps losses in check
• U.S. weekly jobless claims ticked higher last week
• Bigger stimulus developing in China:
• China's overnight repo rate falls to new low
• China to adjust trade tariffs on some goods from Jan 1
• Analysis-China's services sector eyes recovery after reopening, but challenges loom
• Bigger trouble developing in the Eurozone:
• Euro zone business lending growth slows sharply in November
• Wall Street surges in dip-buying rally, oil falls

Friday, 30 December 2022

• Signs and portents for the U.S. economy:
• Oil ends year of wild price swings with 2nd straight annual gain
• Fed minions see U.S. recession ahead:
• New Fed research flags rising risk of U.S. recession
• Bigger trouble, stimulus developing in China:
• China's factory activity likely cooled in Dec on COVID surge: Reuters Poll
• China central bank promises more policy support for economy
• China central bank makes biggest weekly short-term cash injection since 2019
• Bigger trouble expected to keep hanging around the Eurozone:
• High inflation here to stay for coming months, says German industry
• Stocks fall to end Wall Street's worst year since 2008, S&P 500 finishes 2022 down nearly 20%
• Wall St ends 2022 with biggest annual drop since 2008

On the final trading day of 2022, the CME Group's FedWatch Tool was still projecting just a quarter point rate hike at both the Fed's upcoming 1 February and 22 March (2023-Q1) meetings. The FedWatch tool anticipates a third quarter point rate hike, in June (2023-Q2), with the Fed's series of rate hikes topping out at the 5.00-5.25% range. Looking further forward, developing expectations for a U.S. recession in 2023 have the FedWatch tool projecting two quarter point rate cuts in 2023, the first as early as July (2023-Q3) and the second in November (2023-Q4).

The Atlanta Fed's GDPNow tool's latest projection for real GDP growth in the fourth quarter of 2022 spiked higher to +3.7% from the +2.8% estimate of two weeks earlier. The "Blue Chip consensus" continues to project just over 1% real economic growth for the current quarter of 2022-Q4. The BEA will issue its first estimate of 2022-Q4's GDP later this month, on 26 January 2023, which will help determine which of set of nowcasts is more wrong.

We'll present our first look at the alternative futures for 2023-Q1 in the next edition of the S&P 500 chaos series.