Investor Focus Shifts Fully to 2022-Q2 for S&P 500

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Investors expectations that the U.S. Federal Reserve will start hiking short term interest rates beginning in 2022-Q2 spiked upward during the past week, fueled by the outcome of the FOMC's December 2021 meetings.

According to the CME Group's FedWatch tool, investors are now giving greater than 60% odds of that first hike happening as early as early May 2022, and a nearly 85% probability of a quarter point rate hike in the Federal Funds Rate by mid-June 2022 as the Fed begins belatedly addressing the outbreak of inflation its "run-the-economy-hot" policy combined with excessive spending fueled by the Biden administration's March 2021 stimulus package caused.

CME Group FedWatch Tool Probabilities of Federal Funds Rate Changing at Future FOMC Meeting Dates, Snapshot on 17 December 2021

Consequently, the S&P 500 changed during the week to align with the trajectory of associated with investors focusing nearly all their forward-looking attention on 2022-Q2. Given the record high level at which it ended the previous week, that meant a downward movement in the value of the index.

Alternative Futures - S&P 500 - 2021Q4 - Standard Model (m=-2.5 from 16 June 2021) - Snapshot on 17 Dec 2021

The market-moving news headlines of the week that was point to how much central bank action there was during the week that was.

Monday, 13 December 2021
Tuesday, 14 December 2021
Wednesday, 15 December 2021
Thursday, 16 December 2021
Friday, 17 December 2021

This is the final edition of the S&P 500 chaos series in 2021. We’ll be back with a two-week catchup edition to close out 2021 on 4 January 2022.