Category Archives: SP 500

S&P 500 Investors Keep Focus Fixed on 2022-Q2 Awaiting the Fed’s Next Signals

The third week of May 2022 came and went with Federal Reserve officials signaling their willingness to hike interest rates higher than they've previously suggested. S&P 500 (Index: SPX) investors locked their forward-looking focus on the current quarter of 2022-Q2 in response, held there by the uncertainty of what will come from the decisions the Fed will make before its end.

That's what we read in the latest update to the alternative futures chart, which reveals the index is tracking remarkably closely to the alternative trajectory associated with investors focusing their attention on the current quarter according to the dividend futures-based model.

Alternative Futures - S&P 500 - 2022Q2 - Standard Model (m=-2.5 from 16 June 2021) - Snapshot on 20 May 2022

It's unusual for the actual trajectory of stock prices to track so closely along with a particular projection for investors focusing on a given quarter. We normally see more noise in day-to-day trading than we've had during the past week. That said, the clock is ticking down for how long investors can continue to fix their focus on 2022-Q2, which points to a potential investing opportunity that will exist until their forward-looking attention does shift to another point of time in the future in what will be the stock market's next Lévy flight event.

This assumes we don't see significant erosion in the expectations for dividends expected in the upcoming quarters to which investors might next shift their attention. Fortunately, that prospect is so far a low risk consideration for the near term.

Here are the market-moving news headlines that helped shape investor expectations in the week that was.

Monday, 16 May 2022
Tuesday, 17 May 2022
Wednesday, 18 May 2022
Thursday, 19 May 2022
Friday, 20 May 2022

The CME Group's FedWatch Tool continues to project the Fed will hike rates by a half-point in June (2022-Q2), followed by a two more half-point hikes in July and September (2022-Q3). After which, the tool projects the Fed will slow down, hiking rates by just a quarter point each in November and December 2022 (2022-Q4) to close out the year.

The Atlanta Fed's GDPNow tool projects real GDP growth of 2.4% in 2022-Q2, up from last week's projection of 1.8%.

What Should the Value of the S&P 500 Be?

Since the S&P 500 (Index: SPX) peaked at 4,796.56 on 3 January 2022, the index has dropped by 18.2% of that record high value. But that simple observation raises a question. What should the value of the S&P 500 be?

We have a couple of interesting ways to approach answering that question, the first of which relies upon how investors set the average level of the index with respect to its trailing year dividends per share during periods of relative order in the U.S. stock market. The following chart illustrates the five major periods of order the S&P 500 has experienced since December 1991, which have been periodically interrupted by periods of relative chaos.

S&P 500 Average Monthly Index Value vs Trailing Year Dividends per Share, December 1991-May 2022 (through 18 May 2022)

In the chart, we show the mathematical relationships that have applied during those relative periods of order, which connects the average monthly value of stock prices (y) with the level of the index' trailing year dividends per share (x). We've built the following tool to do the related math to see how investors would set the value of the S&P 500 for the period of order you select for the trailing year dividends per share you enter. If you're accessing this article on a site that republishes our RSS news feed, you may need to click through to our site to access a working version of the tool.

Alternate S&P 500 Valuation Criteria
Input Data Values
Relative Period of Order
Trailing Year Dividends per Share

Projected S&P 500 Index Value
Estimated Results Values
Index Value Corresponding to Selected Period of Order

Using the default selection of the most recent period of order, which lasted from December 2018 through February 2020, until the arrival of the coronavirus pandemic initiated a period of chaos for the U.S. stock market, we find that with May 2022's estimated $62.90 for trailing year dividends per share, the corresponding value of the S&P 500 would be $3,777.

Or rather, that's what the math suggests would be a reasonable level for the S&P 500 had that relative period of order continued to the present. Since that value is below the current level of the index, this result suggests stock prices still have room to fall, but it's important to note that this level is neither a ceiling nor a floor. It simply represents the mean to which stock prices would revert during this particular previous relative period of order.

That mean level is visualized as the extended trajectory for this relative period of order in the chart above, where you can see the chaotic impact the arrival of the coronavirus pandemic had in March 2020, followed by the bubble inflated by the COVID stimulus programs of 2020 and President Biden's inflation-generating American Rescue Plan Act stimulus program of March 2021. That bubble entered its deflation phase after December 2021, which is still underway today.

With more than one previous relative period of order to choose from, there's a lot of room for interpretation. Other selectable options, such as the one for the early 1990s, may suggest the S&P 500 is greatly undervalued for the dividends per share you enter. One of the cool things about this tool is you can do the math for any level of trailing year dividends per share you choose, so you can find out how stock prices could alternatively been set during the days of the Dot Com Bubble, if that's your area of interest, or during any of the other periods in between. Go ahead and take the tool for a test drive to explore the world of alternate S&P 500 valuations!

Can you project where the S&P 500 could go during periods of chaos?

We know what you're thinking. Wouldn't it be nice if you could project what a reasonable level for the S&P 500 would look like during periods of chaos for the stock market? It would indeed, and we have you covered there as well.

Alternative Futures - S&P 500 - 2022Q2 with m=-2.5 from 20210616 - Snapshot on 20220518

If you know what the expectations are for changes in the growth rate of dividends at different points of time in the future, and you know how far into the future investors are focusing their forward-looking attention as they set current day stock prices, you can reasonably project the level for the S&P 500 even during periods of chaos in the stock market. It has been possible since April 2009 and became practical to accomplish after November 2009, when the CBOE introduced modern quarterly dividend futures for the S&P 500.

Spring 2022 Snapshot of the Future for S&P 500 Dividends

The outlook for the dividends per share of the S&P 500 (Index: SPX) brightened since we last checked on them at the midpoint of 2022-Q1. The following chart shows those expectations as of Thursday, 12 May 2022:

Past and Projected Quarterly Dividends Per Share Futures for S&P 500, 2020-Q4 Through 2022-Q4, Snapshot on 12 May 2022

Here's how future expectations for the S&P 500's dividends per share have changed for each quarter in 2022 since our last snapshot three months ago:

  • 2022-Q1: Up $0.13 per share
  • 2022-Q2: Up $0.27 per share
  • 2022-Q3: Up $0.58 per share
  • 2022-Q4: Up $0.41 per share

These increases across each quarter point to an improved outlook for the S&P 500's dividends over the past three months. If you've been following our S&P 500 chaos series though, you know why the index has behaved as it has while falling in the time since our last look at the index' dividend futures.

About Dividend Futures

Dividend futures indicate the amount of dividends per share to be paid out over the period covered by each quarters 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 "current" quarter of 2022-Q2 began on Saturday, 19 March 2022 and will end on Friday, 17 June 2022.

That makes these figures different from the quarterly dividends per share figures reported by Standard and Poor, who 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.


The past and projected data shown in this chart is from the CME Group's S&P 500 quarterly dividend index futures. The past data reflects the values reported by CME Group on the date the associated dividend futures contract expired, while the projected data reflects the values reported on 12 May 2022.

Spring 2022 Snapshot of Expected Future S&P 500 Earnings

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.

Since our last update three months ago, Standard and Poor's projections have strengthened, indicating expectations of stronger growth through 2022 and 2023. The following chart illustrates how the earnings outlook has changed with respect to previous snapshots:

Forecasts for S&P 500 Trailing Twelve Month Earnings per Share, December 2017-December 2023, Snapshot on 12 May 2022

The improved outlook for S&P 500 earnings has developed even though the Federal Reserve has begun raising interest rates and is signaling larger rate hikes to squelch excess inflation generated by the Biden-Harris administration's fiscal policies. Since those policies represent a growing headwind for the U.S. economy, it raises the question of how much more improvement would have been seen had the Fed chosen to continue holding the Federal Funds Rate at the zero bound.


Silverblatt, Howard. Standard & Poor. S&P 500 Earnings and Estimates. [Excel Spreadsheet]. 12 May 2022. Accessed 13 May 2022.

S&P 500 Investors Set Their Full Focus on 2022-Q2

After starting the week with a bang, the S&P 500 (Index: SPX) saw its level of volatility die down as investors solidified their forward-looking attention on 2022-Q2.

How long it might stay there is a question that remains to be answered, but the latest update of the alternative futures chart shows the level of stock prices is fully consistent with that assessment.

Alternative Futures - S&P 500 - 2022Q2 - Standard Model (m=-2.5 from 16 June 2021) - Snapshot on 13 May 2022

Better still, we've moved out of the period where the echoes of the past volatility of stock prices affected the accuracy of the dividend futures-based model's projections, which had required us to add redzone forecast ranges to the chart to compensate in helping track the S&P 500's latest Lévy flight events.

Since we've already outlined what may come next for the S&P 500 in an update to the previous entry of our ongoing S&P 500 chaos series, let's recap the market-moving news headlines from the week that was:

Monday, 9 May 2022
Tuesday, 10 May 2022
Wednesday, 11 May 2022
Thursday, 12 May 2022
Friday, 13 May 2022

According to the CME Group's FedWatch Tool, the Fed will hike rates by a half-point in June (2022-Q2), followed by a two more half-point hikes in July and September (2022-Q3). The Atlanta Fed's GDPNow tool projects real GDP growth of 1.8% in 2022-Q2, down from last week's projection of 2.3%.