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 (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.

(Click on image to enlarge)

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

• Signs and portents for the U.S. economy:
  • Biden team sees few options on inflation before November midterms
    • Bezos and White House battle over taxes and inflation
  • New York state factory activity slumps again in May; price pressures easing
• Fed minions thinking about undoing their overstimulus of U.S. housing market:
  • Sales of Fed's mortgage-backed securities may be future option, Williams says
• Bigger trouble developing in China, Eurozone:
  • China's economy skids as lockdowns hit factories, retailers
    • China April property sales post steepest drop since 2006
  • Hungary PM Orban warns of "era of recession" in Europe
• S&P 500 ends lower as Tesla falls, while energy rallies
  • Yields slip, stocks struggle as economic fears grow

Tuesday, 17 May 2022

• Signs and portents for the U.S. economy:
  • Strong U.S. retail sales, manufacturing output boost economic outlook
    • U.S. manufacturing output rises more than expected in April
  • Oil falls 2% on hopes for Venezuela supply
• Chief minion gets to keep collecting paycheck, says will turn screws as needed; other Fed minions say no recession over next 18 months and that fixing supply chain would fix inflation:
  • Federal Reserve Chair Jerome Powell confirmed by Senate for a second term
    • Fed's Powell vows to raise rates as high as needed to kill inflation surge
    • Quotes: Powell says Fed won't hesitate to move past neutral
  • Bullard: U.S. growth likely to continue above trend amid strong consumption
  • Fed's Kashkari: how high rates need to go depends on supply side
• Bigger trouble developing in China:
  • Beijing's retail, industry upended by COVID restrictions
    • Analysis: China faces uphill battle to repeat 2020 miracle as exports falter
• Eurozone economy less bad than previously thought:
  • Euro zone Q1 GDP growth rate revised upward to end-2021 pace
• BOJ minions got a fever, the only prescription is more stimulus cowbell:
  • BOJ deputy vows to maintain monetary stimulus despite price pressures
• ECB minions thinking some more about hiking rates to combat Eurozone inflation, will devote more time to listening to central bank heads:
  • ECB to hike deposit rate 25 bps in July, ditch negative rates by end-September: Reuters poll
    • ECB's Centeno says policy normalisation must happen in sustainable way
  • Exclusive-ECB's Lagarde gives national central bank chiefs louder voice on policy
• Wall Street ends sharply higher, fueled by Apple
  • Consumer stocks diverge as Walmart disappoints, citing inflation

Wednesday, 18 May 2022

• Signs and portents for the U.S. economy:
  • Wells Fargo sees end-of-year U.S. recession, cuts GDP view
  • Oil falls 2.5% as U.S. refiners ramp up output, equities retreat
  • U.S. housing market cooling as building permits tumble, starts fall
• Prospective Fed minion wants to fight inflation, established Fed minions claim they want smaller rate hikes:
  • Fed nominee Barr says he's committed to bringing down inflation
  • Fed's Evans wants smaller U.S. rate hikes by July or Sept
• Fed's Harker sees 50 bps rate hikes in June, July, then 'measured' hikes
• Bigger trouble developing in China, Japan:
  • China lockdowns impeding supply chain recovery, slowdown risks spillovers, Yellen says
  • Japan's GDP shrinks as surging costs raise spectre of deeper downturn
• ECB minions still thinking about hiking interest rates someday, worry about Ukraine war's effect on Eurozone economy:
  • ECB policymakers push for quick monetary policy normalisation
    • Euro zone April inflation revised down to 7.4%; still a record high
  • ECB tells banks to buckle up as Ukraine war hits economy
• Wall Street ends sharply lower as Target and growth stocks sink
  • Instant View: Wall Street recoils 3% on Target, tightening concerns

Thursday, 19 May 2022

• Signs and portents for the U.S. economy:
  • U.S. existing home sales fall for third straight month; house prices at record high
  • Investors jolted as U.S. retailers show inflation hitting consumers
  • U.S. labor market in spotlight as weekly jobless claims hit 4-month high
  • Oil swings wildly, rebounding to gains after steep losses
• Fed minions say they're not worried about falling stock prices:
  • Fed's George: Policy "not aimed" at equity markets, but it will be felt there - CNBC
• Bigger trouble, stimulus developing in China:
  • China's zero-COVID policy dashes global hopes for quick economic return to normal
  • China seen lowering lending benchmark LPR to support economy: Reuters Poll
• Egypt's central bank launches serious assault against inflation:
  • Egypt's central bank, citing inflation, hikes interest rates 200 bps
• ECB minions put credibility on the line while thinking about hiking rates to fight inflation someday:
  • As ECB pares back stimulus, investors alert for fragmentation risk
  • ECB accounts show debate over speed of policy tightening
• S&P 500 ends lower as Cisco and Apple sink
  • Cisco crashes to 18-month low as China lockdown raises supply doubts
  • Rare double whammy hits retail investors: steep slumps for both stocks and bonds

Friday, 20 May 2022

• Signs and portents for the U.S. economy:
  • Oil settles up as supply risks outweigh economic worries
• Most dovish Fed minion now setting expectations for bigger rate hikes:
  • Strong household finances may mean Fed must to do more -Kashkari
• Bigger trouble, stimulus developing in China:
  • Taiwan export orders fall for first time in 2 years, hurt by China lockdowns, global weakness
  • Shanghai economy hit on all sides in April by COVID lockdown
  • China cuts borrowing rate more than expected to revive housing sector
  • China pledges to give virus-hit companies easier access to capital markets
• BOJ minions elated to finally hit their inflation target after years of deflationary conditions, pledge to keep stimulus going:
  • Japan April consumer inflation beats BOJ target for 1st time in 7 years
  • BOJ's Kuroda vows to keep easy policy, remain dovish G7 outlier
• Former central banker says central banks share blame in creating inflation:
  • Ex-Bank of England governor King says central banks share blame for inflation
• ECB minions thinking they can safely hike rates to combat inflation:
  • ECB can move rates back into positive territory: Visco
  • ECB can safely raise rates out of negative territory, Visco says
  • Money markets price in 50-50 chance of 50 bps July ECB hike
• Wall Street ends mixed, Tesla falls
  • Retail sell-off: discounters, auto stores lead losses

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%.