The S&P 500 (Index: SPX) dropped 1.1% to close the trading week ending Friday, 10 February 2023 at 4090.46.

But according to the dividend futures-based model, the trajectory of the index is running hot compared with the latest redzone forecast. Here's the newest update to the alternative futures chart showing that situation:

Another way to read the level of the S&P 500's trajectory is that it's running about six to seven weeks ahead of the dividend futures-based model's schedule.

There's another possibility that might explain the current trajectory of stock prices. As shown, the model is currently based on the assumption its multiplier is +2.0, which is consistent with how investors have been setting stock prices since 13 September 2022. But what if that has changed for 2023?

One hypothesis we're currently evaluating behind the scenes is that the multiplier may have shifted to zero at the beginning of the year. Here's what the alternative futures chart looks like with that assumption.

Time will tell which of these scenarios is right. Unfortunately, unlike changes in dividend expectations that are easy to identify, the factors that cause the dividend futures-based model's basic multiplier to shift are much more opaque. Our thinking is those shifts are affected by substantial changes in expectations for earnings growth, inflation, and interest rates, but lack the data to be able to tell one way or another. Despite having invented and developed the model in 2008 and early 2009, we only have the experience of its multiplier changing from 2020 onward to test that proposition. The jury is very much out for what variables contribute to the shifts in the multiplier, which is why we rely on observation to determine its approximate value.

Meanwhile, the model works in forecasting stock prices because the multiplier tends to be constant for sustained periods of time. Since 2008, we've seen everything from a matter of weeks (in early 2020) to more than a decade (before early 2020)! How long those periods are sustained is one of the chaotic factors that make the behavior of stock prices so fascinating.

Monday, 6 February 2023

• Signs and portents for the U.S. economy:
  • Oil rises 1% in choppy trade on China demand hopes
• Fed minions pushing for higher rates:
  • Fed may need to push rates higher, Bostic tells Bloomberg
  • U.S. financial conditions may tighten further: SF Fed paper
• BOJ minion committed to legacy of never-ending stimulus, new management being sought:
  • Kuroda defends BOJ's current stimulus as best way to hit inflation target
  • Japan's government has sounded out Amamiya about becoming BOJ governor - Nikkei
• Central bank minions sending conflicting signals on direction of interest rates:
  • Brazil interest-rate cuts seen kicking off in Nov, cenbank survey shows
  • Bank of England's Mann doubles down on backing for rate hikes
• ECB minions thinking they may be closer to done with rate hikes:
  • ECB policymakers converging on end-point for rate hikes
• Wall St ends down as investors await Fed's next steps

Tuesday, 7 February 2023

• Signs and portents for the U.S. economy:
  • Oil surges more than 3% as Fed's Powell eases rate hike concerns
  • U.S. trade gap widens in December; deficit highest on record in 2022
• Powell: Jobs report was stronger than expected but shows why this will be a long process
  • Fed's Powell says job strength shows inflation fight may last 'quite a bit of time'
  • Powell: A "couple of years" before Fed nears end of balance sheet decline
• Bigger trouble developing in Brazil, Taiwan, Eurozone:
  • Brazil's auto production, sales fall in January as demand slows
  • Taiwan Jan exports down for 5th month, China shipments slump
  • German industrial output falls more than expected in December
• Other central bank minions starting to think they're done with rate hikes:
  • Bank of Canada says no new rate hikes needed if inflation falls as expected
  • Australia hikes rates, but pause from big central banks is near
    • Australia central bank signals more tightening ahead after lifting rates to decade-high
• ECB minions find back door to create stimulus, rising inflation expectations:
  • ECB cuts interest rate on government deposits
  • ECB survey shows rising inflation expectations despite energy price falls
• Wall Street rallies but trade choppy as investors digest Powell comments

Wednesday, 8 February 2023

• Signs and portents for the U.S. economy:
  • Oil settles up for third day as interest rate concerns ease
  • U.S. Treasury's Yellen: inflation remains elevated but there are encouraging signs
    • Shoppers to face fresh price hikes as stores, suppliers pass on costs
  • U.S. recession still likely despite resilient economic data - PIMCO
    • U.S. wholesale inventories post smallest gain in 2-1/2 years; sales muted
• Fed minions excited to deliver smaller rate hikes:
  • Fed officials on board with more modest pace of interest rate hikes
    • Fed's Waller sees no sign of 'quick' decline in inflation
    • Fed's Cook: January job gains increase hopes for soft landing
    • Fed's Williams: Financial conditions seem broadly consistent with the Fed's outlook on policy
• Bigger stimulus rolling out in China:
  • China's Jan new yuan loans seen hitting record high on policy support- Reuters poll
• JapanGov minion wants to keep never-ending stimulus alive:
  • Veteran ruling party lawmaker Amari warns BOJ against raising rates
  • Japan PM says global communication skills key for new BOJ head pick
• ECB minions starting to worry about loans going bad, thinking about keeping bigger rate hikes going:
  • ECB to zero in on soured loans this year as economy slows
  • ECB's Knot sees big May rate hike if core inflation doesn't fall: MNI
• Wall St falls after recent strong gains, Alphabet shares sink

Thursday, 9 February 2023

• Signs and portents for the U.S. economy:
  • Oil falls as earthquake impact on crude eases, rate hike fears rise
  • Falling online prices point to U.S. goods deflation continuing
• Bigger trouble developing in Asia:
  • South Korea's think tank warns of steeper economic slowdown in H1
  • S&P warns of possible economic blow, hit to Japan Inc from BOJ rate hike
• More central bank minions expected to keep hiking rates even as uncertainty mounts:
  • Banxico boosts rate more-than-expected, signals smaller hikes ahead
  • Bank of England officials split over future path for rates
  • Indian central bank to hike rates again on sticky inflation, Fed pressure - analysts
  • More rate hikes on way as Swedish cbank says wants stronger currency
• Wall St dips as Treasury yields rise after auction

Friday, 10 February 2023

• Signs and portents for the U.S. economy:
  • Oil prices rise over 2% on Russian plan to cut output
  • Revisions show U.S. consumer prices a bit firmer than previously reported
  • U.S. consumer sentiment improves; inflation expectations rise
• Fed minions on board with small rate hikes, claim no rate cuts until 2024:
  • Fed's Harker says small rate hikes on table, opens door to cuts next year
• Bigger stimulus starts showing up in China:
  • China Jan new bank loans jump more than expected to record 4.9 trln yuan
• BOJ minions to get new boss, who might end never-ending stimulus:
  • Japan set to pick academic Ueda as next Bank of Japan chief -sources
    • Factbox-Kazuo Ueda: Who is the new Bank of Japan governor and what can we expect from him?
    • Japan's yen and bond bears delighted by government's BOJ surprise picks
    • Japan govt must discuss policy goals with new BOJ chief-Finance Minister Suzuki
    • Analysis-Kuroda's shock therapy leaves Bank of Japan with mixed legacy
    • Analysis-Japan's debt time bomb to complicate BOJ exit path
  • Japan's wholesale inflation stays elevated, keeps BOJ under pressure
• ECB minions say screw the Eurozone recession, more rate hikes ahead:
  • ECB must keep raising rate despite public sacrifice, Vujcic says
  • ECB rates must rise significantly; broad disinflation not happening - Schnabel
• Nasdaq ends lower as Treasury yields rise, Lyft plunges
  • Last year's laggards lead U.S. stocks' 2023 rebound, for now

The CME Group's FedWatch Tool continues to project a quarter point rate hike at the Fed's upcoming 22 March (2023-Q1) meeting, followed by another at its 3 May (2023-Q2) meeting, with the latter representing the last for the Fed's series of rate hikes that started back in March 2022. After that, the FedWatch tool anticipates the Fed will hold the Federal Funds Rate at a target range of 5.00-5.25% until 1 November 2023 (2023-Q4). It anticipates a quarter point rate hike six weeks later when the Fed meets in mid-December (2023-Q4).

The Atlanta Fed's GDPNow tool's projection for real GDP growth in the first quarter of 2023 jumped to +2.2% from its previous +0.7% estimate.

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