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.

After a week that saw it rise as high as 4,019.65, the S&P 500 (Index: SPX) ultimately dropped 2.8% from where it ended the previous week to close at 3,852.36 on Friday, 16 December 2022.

Here's the latest update to the dividend futures-based model's alternature futures chart:

Before we go any further, let's recap a short bit of our analysis from last week, which will help explain what's going on in the updated portion of the alternative futures chart:

If investors focus predominantly on 2023-Q1, the trajectory of the S&P 500 will remain within the redzone forecast range. If investors shift a larger portion of their attention further forward in time to 2023-Q2, the trajectory will drop below this indicated range.

On Wednesday, 14 December 2022, the trajectory of the S&P 500 has risen to the middle portion of the redzone forecast range, corresponding with investors mostly focusing their forward-looking attention on 2023-Q1. But that focus was very short-lived, as investors quickly shifted their forward-looking attention beyond the first quarter of 2023.

Here's what changed to prompt that shift in how far forward investors are looking. After the Fed's expected half point rate hike on 14 December 2022, news indicating developing weakness for the U.S. economy reshaped investors expectations of how the Fed will be changing interest rates in 2023. Those changes are captured by the CME Group's FedWatch Tool, which dialed back its forecast for the Fed's next rate hike from a half point to just a quarter point at its 1 February (2023-Q1) meeting. The FedWatch tool then sees just one more quarter point rate hike in March (2023-Q1), where the Federal Funds Rate would top out in the 4.75-5.00% range, below what they expected just a week earlier. Looking further forward, developing expectations for a recession in 2023 have the FedWatch tool projecting two quarter point rate cuts, the first in September (2023-Q3) and the second in December (2023-Q4).

Based on this information, through Friday, 16 December 2022, we would describe the level of the S&P 500 as consistent with investors splitting their attention between 2023-Q1 and 2023-Q3. That level is coincidentally near the middle of where we might sketch a new redzone forecast range on the chart to indicate where the S&P 500 would be if investors were closely focused on 2023-Q2.

Here are the week's market-moving headlines:

Monday, 12 December 2022

• Signs and portents for the U.S. economy:
• Oil up $2/bbl on supply risks amid ongoing Keystone outage
• Americans expected waning inflation pressures, rising incomes in November
• Investors don't have high opinion of Fed minions' abilities:
• Analysis-Investors on alert for policy error after cheering slower rate hikes
• Wall St climbs with inflation, Fed on deck

Tuesday, 13 December 2022

• Signs and portents for the U.S. economy:
• Nov U.S. CPI cools down, spelling relief for markets
• U.S. consumer prices increase moderately in November
• Food inflation: Tight grain, oilseed supplies to keep prices elevated
• U.S. existing-home sales to slide to 11-year low in 2023, NAR says
• Fed seen slowing rate hikes, likely ending them below 5%
• Traders boost bets on Fed rate-hike slowdown early next year
• Bigger stimulus developing in China:
• Chinese leaders to signal more stimulus for 2023 as COVID clouds outlook
• Wall St rises after CPI data but Fed concerns persist
• Wall St cautiously optimistic as easing inflation lifts hopes of smaller rate hike

Wednesday, 14 December 2022

• Signs and portents for the U.S. economy:
• U.S. consumer loan delinquencies seen surging to 13-year high in 2023 - study
• Column-Liquidity risks flash private debt warning: McGeever
• U.S. import prices drop further; inflation pressures easing
• Fed raises rates by half percentage point, sees economy nearing stall speed
• Fed hikes rates by 50 bp, as expected, keeps hawkish tone
• Fed policymakers see interest rates higher, for longer
• Fed's Powell says inflation data received in Oct and Nov shows 'welcome reduction'
• Bigger trouble developing in Japan, Brazil:
• Japan manufacturers' mood sour as cost pressures bite, service sector upbeat
• Brazil's economic activity shrinks in October on rate hike impact
• Smaller trouble developing in the Eurozone?
• German recession will be milder than expected: Ifo
• Even bigger stimulus developing in China:
• China plans to expand domestic demand to spur economy - state media
• Central bank rate hikes to continue through end of 2022:
• South Africa set to end tightening cycle in Q1 with 50 bps more
• ECB minions say elevated inflation to stay in Eurozone for another three years:
• Exclusive-ECB sees inflation above target through 2025, source says
• Wall Street ends lower after latest Fed rate hike

Thursday, 15 December 2022

• Signs and portents for the U.S. economy:
• U.S. retail sales post biggest drop in 11 months; labor market tight
• U.S. manufacturing output dragged down by motor vehicle weakness
• Bigger trouble developing in China, Eurozone:
• China's factory, retail sectors skid as COVID hits growth
• China property slumps further in Nov, policies support gradual recovery
• French economy forecast to contract before recovering next year
• BOJ minions say they can't stop, won't stop never-ending stimulus:
• BOJ to keep ultra-low rates, hold fire until global outlook clearer
• Central bank minions signal more rate hikes are comint, start to signal rate hikes will slow, end in 2023:
• Bank of England raises rates to 3.5%, sees more hikes ahead
• Norway central bank hikes rate by quarter point, likely to act again
• Swiss National Bank says inflation battle not yet won
• Taiwan central bank signals end to rate hikes next year
• Bank of Mexico hikes rate to 10.50%, signals another increase coming
• ECB minions delivers half point rate hike into developing Eurozone recession:
• ECB raises rates again, outlines balance sheet run off
• ECB slows rate hikes but pledges more to keep up inflation fight
• ECB's Lagarde offers back-to-back rate hikes to woo dissenters
• ECB to start offloading bond holdings in March
• ECB raises inflation, cuts 2023 growth projection
• Wall Street slumps as Fed heightens recession fears

Friday, 16 December 2022

• Signs and portents for the U.S. economy:
• U.S. business activity slumps in December; price pressures ease - S&P Global survey
• Fed minions claim they won't start rate cuts until after 2023 recession is well underway:
• Fed could push rates higher, keep them there longer, policymakers say
• Fed could hold rates at peak into 2024, Daly signals
• Bigger stimulus developing in China:
• China's economy picking up but "arduous efforts" needed to sustain momentum - state planner
• China says it will step up support for economy in 2023 amid COVID pains
• Bigger trouble developing in Japan:
• Japan Dec factory activity contracts at fastest pace in 26 months
• Japan Nov consumer inflation likely to hit fresh four-decade high - Reuters poll
• BOJ minions thinking about ending never-ending stimulus:
• As Kuroda bows out, Bank of Japan's rising hawks eye end to unloved yield cap
• Bigger trouble in the Eurozone not as bad as expected:
• Euro zone business activity falls at slower rate in Dec, inflation eases -PMI
• ECB minions say they won't stop fighting inflation, say their jawboning is just like a rate hike, say they won't have more big rate hikes:
• ECB's Villeroy: Match against inflation is not over
• Strong ECB statement equivalent to a bigger rate hike, Holzmann says
• ECB's Centeno sees very low probability of more 75 bps rate hikes
• ECB’s Knot says Fed is closer to end of rate hikes than ECB
• Wall Street's slump continues as recession fears mount
• S&P 500’s consumer discretionary stocks are hammered for 2nd week as recession fears rear up

The Atlanta Fed's GDPNow tool's projection for real GDP growth in the current quarter of 2022-Q4 dropped back to +2.8% from last week's +3.2% estimate. The "Blue Chip consensus" still projects over 1% real economic growth for the current quarter of 2022-Q4.

This is the last post in our S&P 500 chaos series for 2022. We'll be back in the first week of Janaury 2023 to recap the final two trading weeks of 2022, where the big question we have going into those final weeks is whether there will be one or two more Lévy flight events to end the volatile year of trading.

The S&P 500 (Index: SPX) lost 3.3% of its value in the trading week ending on 9 December 2022, closing the week at 3,934.38. The S&P 500 is 18.0% below its record high peak of 4,796.56 recorded on the first trading day of 2022.

The index' trajectory swung to the bottom edge of the latest redzone forecast range on the alternative futures chart and bounced along it during the week. This range is based on the assumption investors would be transitioning their forward-looking focus from 2022-Q4 to 2023-Q1 in the period from 22 November to 23 December 2022.

The market environment continues to force investors to pay lots of attention to how the Federal Reserve will be changing interest rates in the weeks and months ahead. A half point rate hike is anticipated to be set when the Fed's Federal Open Market Committee completes its upcoming two-day meeting on 14 December 2022, after which, we anticipate investors will fully shift to the more distant future quarters of either 2023-Q1 or 2023-Q2.

If investors focus predominantly on 2023-Q1, the trajectory of the S&P 500 will remain within the redzone forecast range. If investors shift a larger portion of their attention further forward in time to 2023-Q2, the trajectory will drop below this indicated range.

Which outcome happens will depend on what new information becomes available during the week. Speaking of which, here are the market-moving headlines we found in the past week's newstreams.

Monday, 5 December 2022

• Signs and portents for the U.S. economy:
• U.S. services industry regains steam; factory orders accelerate
• U.S. factory orders beat expectations in October
• Oil falls over 3% after data raises Fed interest rate worries
• Bigger trouble developing in China, Japan, Eurozone:
• China services activity shrinks to 6-month lows - Caixin PMI
• China's trade likely shrank further in November as external, local demand weakened: Reuters poll
• Japan's service-sector activity growth hits 3-month low -PMI
• Japan Oct real wages post biggest fall in 7 years with hot inflation
• Euro zone likely heading into mild recession-PMI
• Euro zone retail sales weaker than expected in Oct
• ECB minions getting excited for December rate hike:
• ECB's Makhlouf expects 50 bp rate hike on Dec. 15
• ECB's Makhlouf says he can see scenarios where rates go beyond 3%
• Wall St slides as services data spooks investors about Fed rate hikes

Tuesday, 6 December 2022

• Signs and portents for the U.S. economy:
• U.S. trade deficit widens as goods exports hit seven-month low
• U.S banks warn of recession risk, inflation hurting consumers, shares hit
• Bigger trouble developing in the Eurozone:
• Italy statistics bureau slashes 2023 growth forecast amid downside risks
• Analysis-Europe's inflation problem will linger for years to come
• Central bank minions continue rate hikes:
• Australia central bank raises rates to 10-year high, says more needed
• Australia's Big Four banks pass central bank rate hike to home loan customers
• Kuwait central bank raises discount rate by half percentage point – statement
• ECB minions plan to hike rates, claim it's natural:
• ECB to hike again but "very close" to neutral rates - Herodotou
• Wall Street slumps on further recession talk, S&P posts 4th decline

Wednesday, 7 December 2022

• Signs and portents for the U.S. economy:
• U.S. third-quarter productivity revised higher; labor costs still elevated
• Fed minions surprised President Biden's inflation wasn't transitory:
• Inflation miss puts central bankers on back foot
• Bigger trouble developing in Australia:
• Australia's economy slows in Q3 as higher rates, prices sap spending power
• Even bigger trouble developing in China:
• China's trade suffers worst slump in 2-1/2 years as COVID woes, feeble demand take toll
• China forced to lift zero-COVID lockdowns to boost economy; Eurozone economy better than expected:
• 'Daylight is here': China travel searches surge as public cheers COVID easing
• Euro zone economic growth revised up with household, business support
• More central bank minions continue rate hikes:
• India central bank says inflation battle not over, raises rates again
• Expert View: India cenbank hikes key policy rate by 35 basis points
• Bank of Canada makes big rate hike, hints it may the last one
• Bank of England set to raise rates to 3.5% after inflation hits 41-year high
• BOJ minions holding out to keep never-ending stimulus alive despite prediction they'll be forced to rein it in:
• BOJ's Nakamura says it is premature to tweak ultra-easy policy
• BOJ may ditch yield cap next year as inflation perks up-academic
• ECB minions told Eurozone inflation will continue in 2023:
• ECB survey shows rising inflation expectations for year ahead
• Wall St ends lower after choppy trading from rising recession worries

Thursday, 8 December 2022

• Signs and portents for the U.S. economy:
• U.S. labor market still tight despite continuing claims hitting 10-month high
• U.S. Online goods prices fall in positive sign for Fed - Adobe
• Column-Oil prices slump as receding price-cap threat unmasks worsening demand: Kemp
• China's leaders expect ending zero-COVID lockdowns to boost China economy:
• China's economy will pick up pace following new COVID rules: CCTV cites Premier Li
• China's COVID easing seen knocking growth early next year before recovery kicks in
• Bigger trouble developing in China:
• China Nov passenger vehicle sales drop 9.5%, first fall in six months - CPCA
• S&P 500, Nasdaq snap losing streaks after jobless claims rise
• Exxon plans to raise spending in 2023, boost share buybacks
• Tax-loss selling in battered U.S. stocks could spur January snap-back

Friday, 9 December 2022

• Signs and portents for the U.S. economy:
• U.S. producer prices increase; near-term inflation expectations ease
• Recession drumbeat gets louder as more U.S. CEOs strike mellow note for 2023
• Factbox-Big banks see global economy slowing more in 2023, with likely U.S. recession
• U.S. household wealth falls for third consecutive quarter
• Fed minions seeing more demand for emergency loans from banks:
• Fed discount window borrowing is edging up, but is it a problem?
• Signs of easing inflation in China, Eurozone as consumer demand falls:
• China's producer prices fall, consumer inflation slows on soft demand
• German households less pessimistic on inflation, survey shows
• BOJ minions determined to keep never-ending stimulus alive:
• BOJ policymaker Takata rules out ending yield cap - Nikkei
• ECB minions growing excited to deliver smaller rate hike as Eurozone falls into recession:
• ECB to raise deposit rate by 50 bps on Dec 15 as bloc enters winter recession: Reuters Poll
• Wall Street ends lower as investors digest economic data
• Stocks fall, yields rise as inflation data sends mixed signals

The CME Group's FedWatch Tool maintained its projection of a half point rate hike at the Fed's upcoming 14 December (2022-Q4) meeting, but now anticipates another half point rate hike at its 1 February (2023-Q1). The Federal Funds Rate would then be boosted by a quarter point to a peak of 5.00-5.25% in May (2023-Q2). Looking further forward, the FedWatch tool now projects a quarter point rate cuts in 2023 as early as July (2023-Q3) followed by a second in December (2023-Q4) in response to expected recessionary conditions. A growing likelihood for a rate cut in 2023-Q2 is what we think would draw investors' forward-looking focus to this quarter, which would send the S&P 500 lower.

The Atlanta Fed's GDPNow tool's projection for real GDP growth in 2022-Q4 rose to 3.2% from last week's +2.8% estimate. The "Blue Chip consensus" has also been updated to anticipate slightly over 1% real growth for the current quarter of 2022-Q4.

The level of the S&P 500 (Index: SPX) continues to react to news affecting investor expectations of how the Fed will be setting interest rates in upcoming months. The index rose 1.1% from the close of trading during the previous week to close the week ending 2 December 2022 at 4,071.70.

During the week, evidence supporting the hypothesis that investors are in the process of transitioning their forward-looking attention from the current quarter of 2022-Q4 to the upcoming quarter of 2023-Q1 continued to build. The latest update to the alternative futures chart shows that hypothesis as the new redzone forecast range spanning the month-long period from 22 November through 22 December 2022.

Investors are focused on this period because they are paying very close attention to statements by Federal Reserve officials about how they intend to set the level of the Federal Funds Rate when they meet in December 2022 and during the first quarter of 2023. This period is expected to contain the top for this basic interest rate as the Fed's current series of rate hikes comes to an end, now expected at the one year mark after they began.

The market moving headlines of the week that was emphasizes the outsize role the Fed is having on the trajectory of the U.S. stock market. Pay close attention to the news of 30 November 2022, since this news allowed the S&P 500 to end the month with a bang.

Monday, 28 November 2022

• Signs and portents for the U.S. economy:
• U.S. crude turns positive, Brent pares losses on output on OPEC+ rumors
• China's anti-lockdown protests shake stocks and oil
• Fed minions say they want higher rates for longer before any rate cuts:
• Fed has 'a ways to go' on interest rate hikes, Bullard says
• Fed could cut interest rates in 2024, Williams says
• Fed's Barkin sees slower rate hikes, for longer, maybe higher
• Fed's Brainard: Successive supply shocks a challenge for central banks
• Bigger trouble developing in China:
• China's industrial profits drop further as COVID woes take toll on economy
• Marketmind: China crisis brewing
• China's factory activity contraction likely deepened in Nov on COVID woes: Reuters Poll
• Central bankers starting to pitch "shallow" recession, apologize for failing to predict their rate hikes:
• NZ faces 'shallow' recession as rates need to rise more - senior central banker
• Australia's top central banker apologises for past rate guidance
• ECB minions see more inflation ahead, won't commit on where, when rate hikes will peak:
• ECB's Lagarde keeps options open on path for rates
• ECB's Lagarde says we haven't reached inflation peak
• Apple, energy shares drag Wall St lower amid China COVID protests
• Apple shares slip as China factory unrest fuels iPhone supply concerns

Tuesday, 29 November 2022

• Signs and portents for the U.S. economy:
• U.S. house annual prices slow again in September
• U.S. Thanksgiving weekend sees record 197 million shoppers -NRF
• U.S. consumer confidence at four-month low; house price inflation slows
• Fed minions leaning toward smaller rate hikes:
• Three Fed bank boards wanted smaller discount rate hike
• Recession may force Fed rate cut in 2023, sending Treasury yields lower -BofA
• Bigger trouble developing in South Korea:
• South Korea November exports set to fall by most in 2-1/2 years - Reuters poll
• Exclusive-South Korea's Yoon urges attention to any 'financial instability' as money market jolted
• Better than expected news in Eurozone:
• Euro zone economic sentiment rebounds in Nov more than expected
• German inflation in key states eases in November
• Further Polish rate hikes this cycle may not be necessary, says c.banker Wnorowski
• S&P 500 seen ending end next year up 6% after choppy first half: Reuters poll

Wednesday, 30 November 2022

• Signs and portents for the U.S. economy:
• U.S. private payrolls growth slows in November-ADP
• U.S. pending home sales fall 4.6% in October
• Job openings data shows modest progress for Fed's labor market hopes
• U.S. job openings fell moderately in October
• Fed minions claim they won't crash economy, say they're ready for smaller rate hikes, but don't want to have to start cutting them anytime soon:
• Fed's Powell: Rate hikes to slow, but adjustment just beginning
• Fed won't crash economy with interest-rate hikes: Powell
• Fed Chair Powell: cutting rates is not something to do soon
• Instant View: Powell says rate hike moderation may come by December
• Fed's Cook says time nearing to increase rates in smaller steps
• Bigger trouble developing in China:
• China's services sector activity falls further in Nov - official PMI
• China factory, services activities slide to 7-month lows on COVID curbs
• BOJ minions starting to notice inflation:
• BOJ flags broadening price increases in once deflation-prone Japan
• ECB minions noticing less-than-expected inflation:
• Big euro zone inflation drop bolsters hopes for smaller ECB hike
• Wall Street ends sharply higher after Powell comments

Thursday, 1 December 2022

• Signs and portents for the U.S. economy:
• U.S. manufacturing sector contracts in November - ISM
• U.S. construction spending falls in October on single family housing
• U.S. farm incomes seen soaring to new highs on global food, feed demand
• Fed minions want to hold interest rates at high level for longer:
• Fed's Bowman: interest rates need to be sufficiently restrictive "for some time"
• Bigger trouble developing in Asia:
• China's factory activity shrinks in Nov amid widespread COVID curbs - Caixin PMI
• New home prices in China fall further in November - survey
• Japan's factory activity shrinks for first time nearly 2 years -PMI
• South Korea Nov exports fall most in 30 months on slow China demand, semiconductors
• Bigger trouble developing in the Eurozone:
• Germans spending less as soaring power, food costs gnaw finances
• Bigger trouble developing in North America:
• Canadian factory sector activity slows for fourth month
• BOJ minions fearing inflation raise prospect of ending never-ending stimulus:
• BOJ policymaker signals chance of 'pre-emptive' stimulus withdrawal
• ECB minions worried Eurozone banks not doing enough to avoid failing, excited about hiking rates:
• Euro zone banks not facing up to reality of downturn, ECB says
• ECB's Lane says real rates have already risen 'quite a bit'
• Wall St falls after bleak manufacturing data, Salesforce tumbles
• Salesforce shares tumble after surprise exit of co-CEO Taylor

Friday, 2 December 2022

• Signs and portents for the U.S. economy:
• U.S. labor market shrugs off recession fears; keeps Fed on tightening path
• Fed minions say labor market will stay tight, are expected to set Federal Funds Rate at 5% in 2023; discover they caused 2021's surge in reverse repos:
• Fed's Barkin: labor supply likely will remain constrained
• Fed's Evans sees slower rate hike pace, "slightly higher" peak rate
• Traders now see Fed policy rate hitting 5% next year
• NY Fed paper ties reverse repo surge to bank regulation change
• Bigger stimulus developing in China:
• Exclusive-China's top banks to issue offshore loans to help developers repay debt -sources
• Bigger trouble developing in the Eurozone:
• German exports fall more than expected as demand cools in Europe, U.S
• ECB minions worried government stimulus efforts are adding to Eurozone inflation, plan to shrink their balance sheet:
• ECB's Lagarde warns some fiscal policies in Europe could fuel excess demand
• Explainer-ECB to start offloading debt to fight inflation
• ECB must focus on 2% goal after inflation slowdown, says De Guindos
• Wall Street closes modestly lower after jobs report

The CME Group's FedWatch Tool continues to project a half point rate hikes at the Fed's upcoming December (2022-Q4) meeting, but now anticipates quarter point rate hikes at its February and March 2023 (2023-Q1) meetings. The Federal Funds Rate is still projected to peak at a target range of 5.00-5.25%. Looking further forward, the FedWatch tool now anticipates two quarter point rate cuts in 2023, coming in November and December (2023-Q4) as the Fed swings into reverse because of expected recessionary conditions in the U.S. economy.

The Atlanta Fed's GDPNow tool's projection for real GDP growth in 2022-Q4 rose plunged to 2.8% from last week's +4.3% estimate. That plunge shrank the gap between its current projection and the so-called "Blue Chip consensus", which still predicts near zero growth during the current quarter of 2022-Q4.

Shortened by the Thanksgiving Day holiday, the S&P 500 (Index: SPX) mostly rose during a slow trading week, only dipping slightly on Friday, 25 November 2022 to end the week at 4,026.12. The index is 770.44 points (or 16.1%) below the index' all-time record high close on 3 January 2022.

The newly updated alternative futures chart shows the index' trajectory as running to the high side of the range associated with investors focusing their attention on the current quarter of 2022-Q4.

We'll soon be entering a period where the echoes of past volatility will skew the dividend futures' model's raw projections. Looking past that period however, we see the projections for 2023-Q1 are rising to a similar level as today's stock prices. That opens up the possibility that when investors act to shift their forward-looking focus away from the current quarter, which they'll be forced to do in the next several weeks, stock prices may not change much from their current level.

Until, that is, investors have reason to look past 2023-Q1 to consider what comes after. As we've seen over the past several weeks, the top two drivers affecting how far into the future investors are looking is what the Fed will do with interest rates and when it will do them.

We'll cover what changes they're expecting and when they're expecting them at the end, but for now, here are the market moving headlines of the week to provide the context in which investors made decisions during the holiday-shortened, slow trading week that was.

Monday, 21 November 2022

• Signs and portents for the U.S. economy:
• Oil rebounds from early plunge after Saudis deny OPEC+ output report
• Fed minions say smaller rate hikes ahead, Federal Funds Rate to peak around 5%
• Fed's Mester says she supports smaller rate hike in December
• Fed's Daly: Currently expect fed funds rate to top out around 5%
• Fed's Daly: Lots of options on table for December FOMC rate hike
• Real impact of Fed hikes likely bigger than what target rate implies, Daly says
• Bigger trouble developing in China:
• Beijing reports 316 new local COVID cases, enforces inbound travel rules
• Bigger stimulus developing in China:
• China tells banks to step up credit support for economy
• China leaves lending benchmarks unchanged for 3rd straight month in Nov
• China regulator plans to improve balance sheets of 'good quality' developers
• China to provide 200 billion yuan in loans to commercial banks for housing completions
• JapanGov, BOJ minions looking to deliver more stimulus:
• Japan finance minister urges swift adoption of more spending measures
• BOJ deputy governor candidate calls for more flexible rate policy
• Positive growth signs, bigger stimulus developing in Eurozone:
• German tax take rebounds in October -ministry report
• German industry calls for more support to diversify beyond China
• ECB minions thinking about backing off from bigger rate hikes, say Eurozone inflation will top out in early 2023:
• ECB's Lane makes case for smaller rate hikes ahead - MNI
• ECB's Centeno sees possibility of rate hike smaller than 75 bps
• ECB's Villeroy: inflation in France and Europe will peak in first half of 2023
• Wall Street slips as concerns rise of stricter China COVID curbs

Tuesday, 22 November 2022

• Signs and portents for the U.S. economy:
• Oil rises 1% as OPEC+ focus on supply cuts outweighs recession concerns
• Fed minions say their focused on fighting inflation with rate hikes, wonder why Americans aren't saving more:
• Fed's Mester: Lowering inflation remains Fed's main goal
• Fed's George: Could take higher interest rates for longer to encourage saving
• Bigger trouble, stimulus developing in the Eurozone:
• Europe to be hit hardest in global slowdown -OECD
• Almost one in five Germans dipping into savings to get by - poll
• Euro zone must keep investing during slowdown, help ECB fight inflation -Commission
• German finance minister: must talk about fiscal stimulus for 2024 budget
• BOJ minions see inflation hit record high while they continue never-ending stimulus:
• BOJ's price gauge hits record high in sign of broadening inflation
• ECB minions excited to deliver smaller rate hikes with Eurozone entering recession:
• ECB set to raise deposit rate 50 bps as euro zone enters recession -economists: Reuters poll
• ECB's Nagel opens door to smaller hikes but sees long way to go
• ECB's Rehn says inflation, economy will decide pace of rate hikes
• ECB's Holzmann says leaning towards a 0.75% rate hike as things stand
• ECB still has long way ahead of it on rate hikes -Ifo president
• S&P closes at more than two-month high on retail, energy lift

Wednesday, 23 November 2022

• Signs and portents for the U.S. economy:
• Oil slides over 3% on Russian price cap talks, U.S. gasoline build
• U.S. weekly jobless claims at 3-month high; equipment spending resilient
• U.S. new home sales unexpectedly rise in October
• U.S. business activity weakens further in November - S&P Global survey
• U.S. core capital goods orders, shipments rebound strongly in October
• Fed minions getting set to shrink size of rate hikes:
• 'Substantial majority' of Fed officials see slowdown in rate hikes 'soon'
• At November Fed meeting, officials flagged market resilience amid volatile conditions
• Bigger stimulus developing in China:
• China will use timely RRR cuts to keep liquidity ample -state media cites cabinet
• ECB minions thinking about smaller rate hikes as they expect recession to take hold this quarter:
• Centeno wants ECB to send clear message of gentler rate hikes
• Euro zone growth will likely be negative in Q4, inflation high, ECB's De Guindos Says
• French economy contracted in November - flash PMI
• German downturn eases in Nov, bringing hope for milder recession -flash PMI
• Wall Street rises as Fed signals slowdown in rate hikes

Friday, 25 November 2022

• Signs and portents for the U.S. economy:
• Oil prices fall 2% as Chinese demand worries linger
• Bigger trouble developing in Japan:
• Japan Nov factory activity shrinks at quickest pace in 2 years
• Consumer inflation in Japan's capital rises at fastest pace in 40 years
• BOJ minions looking for reasons to continue never-ending stimulus:
• Global risks to keep BOJ from adjusting yield cap next year - ex-central bank executive
• Bigger stimulus developing in China:
• China banks pledge $162 billion in credit to developers, shares rally
• Bank of China agrees to provide credit lines totaling more than 600 billion yuan to 10 property developers
• China frees up $70 billion for banks to underpin slowing economy
• ECB minions point at inflation to justify rate hikes, claim its peaking:
• ECB accounts show inflation fears justifying more rate hikes
• Euro area inflation likely near its peak, ECB's De Guindos says
• ECB's Schnabel pushes back on smaller rate hikes
• ECB's Lane plays down wage, core inflation fears
• Nasdaq ends down as investors eye Black Friday sales, China infections

The CME Group's FedWatch Tool continues to project a half point rate hikes at the Fed's upcoming December (2022-Q4) and February 2023 (2023-Q1) meetings. Followed by a quarter point rate hike in March (2023-Q1), the Federal Funds Rate is still projected to peak at a target range of 5.00-5.25%. Looking further forward, the FedWatch tool now anticipates a quarter point rate cut in July (2023-Q3) as the Fed is forced to go into reverse by developing recessionary conditions in the U.S. economy.

The Atlanta Fed's GDPNow tool's projection for real GDP growth in 2022-Q4 rose slightly to +4.3% from last week's +4.2% estimate. There continues to be a large gap between its current projection and the so-called "Blue Chip consensus" that predicts near zero growth in 2022-Q4.