The S&P 500 Continues Upward Drift in Record Territory

You would think more people would be excited by the prospects of the S&P 500 (Index: SPX) setting new highs on almost every day of the week. But we're in the summer doldrums, with investors waiting to see what news might emerge from the meetings of the Federal Reserve's minions later this month at Jackson Hole, Wyoming that might reshape their expectations for the future.

Still, seeing the S&P 500 drift higher is not a bad consolation prize to have to deal with while waiting to find out how the Fed might change its monetary policies.

In terms of the dividend futures-based model's projections, we've entered a very short-term echo where the model's projections will be off for about a week. In the absence of news changing the outlook for investors, we should see the actual trajectory of the S&P 500 continue trending slowly upward to rejoin with the trajectory associated with investors focusing on 2022-Q1 in about a week.

This is one of those circumstances for which we could generate a red zone forecast, but which we won't because it'll be over soon enough to not make the exercise worthwhile. We'll have a bigger echo event to deal with several weeks from now, where we'll refine what we're currently showing in the chart as we get closer to it.

In the meantime, here's the major market-moving news of the trading week ending on Friday, 13 August 2021.

Monday, 9 August 2021

• Signs and portents for the U.S. economy:
  • U.S. consumers' near-term inflation expectations remain high, New York Fed
  • U.S. job openings surge to new record high, hiring increases
  • Oil slides to 3-week low on China's virus curbs, strong dollar
• Fed minions split on keeping stimulus bond buys going, okay with higher inflation:
  • Fed officials say tapering is near, advancing discussion on rate hike
  • Fed's Bostic: U.S. needs to be "beyond the crisis" before rate hike
  • Fed's Barkin: Inflation likely to remain at Fed's 2% target
• Bigger trouble, stimulus developing in China:
  • Wall Street investment banks cut China growth forecasts
  • China central bank to keep monetary policy 'flexible and appropriate'
• Bigger inflation developing all over:
  • https://www.reuters.com/article/us-china-economy-inflation/chinas-july-factory-price-growth-quickens-adds-to-business-and-broad-economic-pressures-idUSKBN2FA03E
• S&P dips, just off record as energy shares fall

Tuesday, 10 August 2021

• Signs and portents for the U.S. economy:
  • U.S. small business optimism drops as labor shortages persist
  • U.S. productivity growth slows in Q2; labor costs revised down in Q1
  • Oil up more than 2%, boosted by forecast for U.S. fuel demand growth
• Fed minion really wants to keep stimulus bond buys going:
  • Fed's Evans: Wants 'few more' job reports before bond taper
• ECB minions side hustle not going well:
  • Euro zone banks left flying solo by new glitch in ECB payment system
• Dow, S&P 500 close at records as U.S. infrastructure bill clears Senate

Wednesday, 11 August 2021

• Signs and portents for the U.S. economy:
  • U.S. mortgage applications rise as rates remain below 3% -MBA
  • U.S. consumer price increases slow in July, signs inflation peaked
  • Crude futures settle higher and add gains on U.S. policy
• Fed minions boost liquidity support, say government response to COVID did harm, indicate they will start paying attention to inflation, and want to stop stimulus bond buys as early as in 2021-Q4:
  • NY Fed's Logan says new repo facilities should boost confidence in money markets
  • Fed's Bostic says the pandemic widened economic disparities
  • Fed's George says policymakers need to watch inflation expectations
  • Fed officials grapple over timeline for tapering asset purchases
    • Fed's Kaplan says central bank should start tapering in October
    • Fed's Barkin: U.S. "closing in" on taper, but could still take a few months
• Slowing inflation growth lifts Dow, S&P to records

Thursday, 12 August 2021

• Signs and portents for the U.S. economy:
  • Oil prices slip as IEA warns of slowdown in demand recovery
  • Spread of COVID-19 Delta variant knocks oil demand outlook -IEA
  • U.S. producer prices at more than decade high; jobless claims fall
• Inflation expectations driving expectations for Fed policy changes:
  • Marketmind: Peak inflation?
    • Analysis-Investors renew focus on Fed following signs inflation may have peaked
  • Fed framework gives rise to mash-up of views, averaging strategies
• Bigger trouble developing in China:
  • Major container ports in eastern China see worsening congestion after COVID-19 cases
• ECB minions ideas for managing inflation not going over well:
  • ECB's new inflation plan fails to win over German analysts, poll shows
• Stocks hit records; dollar, Treasury yields edge up as tapering debate dominates

Friday, 13 August 2021

• Signs and portents for the U.S. economy:
  • U.S. consumer sentiment plummets in early August to decade low
  • Oil dips, little changed on week despite weaker demand forecasts
• Expectations rise that Fed minions will soon start slowing stimulus bond buys:
  • Reuters poll: Fed to unveil bond-buying taper plan next month; jobless rate to fall slowly
  • Factbox-In their own words: Fed policymakers debate when to reduce stimulus
  • Analysis-As Fed shifts gears, shaping consensus gets trickier for Powell
• Bigger trouble developing in Japan, analysts start predicting what countries will default on national debts before 2050:
  • Japan's Q3 growth forecast slashed on COVID-19 surge: Reuters poll
  • Debt in a warm climate: coronavirus and carbon set scene for default
• Dow, S&P close at records as Disney offsets drop in sentiment

We've been sharing the higher-quality news sources we make use of in preparing each edition of our S&P 500 chaos series over the last several weeks. This week, we'll point you toward the CME Group's FedWatch Tool, which is a good way to see how futures traders are betting on how much and when the Federal Reserve will next change short term interest rates in the U.S. Click through the date tabs at the top to see how the expectations change at different FOMC meeting dates in the future... if you look today (16 August 2021), you'll find greater than 50% odds of a quarter-point or larger rate hike by the end of 2022-Q4!