The S&P 500 (Index: SPX) retreated for the fourth consecutive week. The index even crossed into correction territory before bouncing back on Friday, 14 March 2025, closing out the week at 5,638.94, about 2.3% below where it closed the preceding Friday.

The recent spate of negative economic news continued, with both the U.S. and China registering signs of slowing economies. For the U.S., the prospect for slowing economic growth continued to drive changes in the outlook for rate cuts by the Federal Reserve.

Here, the CME Group's FedWatch Tool still projects the Fed will resume cutting rates with a quarter point rate reduction when Fed meets on 18 June (2025-Q2). The FedWatch tool however now anticipates additional quarter point rate cuts at 12-week intervals in the second half of 2025, coinciding with the Fed's FOMC meetings on for 18 June (2025-Q2), and 17 September (2025-Q3) and 10 December (2025-Q4). The last four weeks has seen the FedWatch tool's forecast go from predicting one to four rate cuts during 2025.

Unlike previous weeks however, the trajectory of the S&P 500 remains well below the levels anticipated by the dividend futures-based model at this point in time. Here's the latest update to the alternative futures chart:

We think the market may be experiencing a regime change for the first time since 9 March 2023, which means the multiplier used in the model may have changed. If so, we think the main factor behind that change is the deflation of the AI bubble.

We'll get a better reading this week. The Federal Reserve's Open Market Committee has a two-day meeting to discuss how they'll be setting the Federal Funds Rate in the months ahead. We use the FOMC's meeting dates as calibration points in checking the value of the multiplier because these events draw such close investor focus and can provide a good indication of how far into the future investors are looking. Our next calibration check will be on Wednesday, 19 March 2025, we'll be discussing what we see in the next edition of the S&P 500 chaos series.

There's a little more that goes into determining how far forward in time investors are setting their investment horizon. We draw much of that additional context from the market-moving headlines. Here are the notable headlines from the past week's newstreams.

Monday, 10 March 2025

• Signs and portents for the U.S. economy:
  • Oil prices sink as tariff uncertainty keeps investors on edge
  • Coffee theft surges in the US as prices for the beans soar
  • Companies eye US expansion to lessen fallout from potential tariffs
• Fed minions expected to deliver rate cuts:
  • Fed to deliver rapid-fire rate cuts if economic downturn happens, traders bet
• Bigger trouble, stimulus developing in China:
  • China Slumps Into Deflation Again, With First Negative Core CPI Print Since 2021
• BOJ minions getting the inflation they wanted in Japan, Japan's exports falter:
  • Japan's real wages drop in January, spring wage talks in focus
  • Japan posts current account deficit for first time in 2 years
• ECB minions plan for digital Euro looking doubtful after digital payments breakdown, mixed economic signals developing in Germany:
  • EU lawmakers voice doubts about digital euro after ECB outage
  • German industrial production rises, but exports fall
• Recession fears sent the Nasdaq down 4% and the S&P and Dow both lower by 2%
  • Wall Street ends sharply lower as recession fears loom

Tuesday, 11 March 2025

• Signs and portents for the U.S. economy:
  • Oil settles slightly up on weaker dollar, US economic fears cap gains
  • US car buyers rush to dealer lots to avoid tariff-related price hikes
  • White House says 25% steel and aluminum tariff to go into effect
  • Kennedy tells US food companies to remove artificial dyes
• BOJ minions worrying about what their rate hike plans will do to Japan's economy, will work with government on inflation, say they are close to their inflation target:
  • BOJ to beef up scrutiny on impact of rising rates on banks, deposits
  • Japan government to work with BOJ on rising living costs, economy minister says
  • Japan close to reaching BOJ's price goal, PM Ishiba says
• ECB minions starting to think about funding EU defense industry:
  • ECB's Rehn calls for joint European investment in air defence, drones
• Stocks end volatile session lower after flurry of trade, diplomatic developments

Wednesday, 12 March 2025

• Signs and portents for the U.S. economy:
  • US consumer price growth slows in February
    • CPI read: Food inflation runs below the overall average despite high prices for eggs and coffee
    • The Consumer Price Index is based on prices sampled during the second week of the previous month. Here is a preview for what to expect for egg prices next month:
      • Egg Prices Plummet
  • Trump metals tariffs draw swift retaliation from Canada and EU
• Fed minions expected to resume rate cuts in June 2025:
  • Cooler inflation paves way for Fed to resume rate cuts in June
• Bigger trouble, stimulus developing in China:
  • Iron ore spooked by resumed talks of China's steel output cut
• BOJ minions claim they'll keep hiking interest rates, more worried about inflation than crashing Japan's economy:
  • BOJ unfazed by rising bond yields, signals resolve to keep hiking rates
  • Japan's wholesale inflation hits 4%, keeps BOJ rate-hike bets alive
• Bank of Canada cuts interest rates:
  • Bank of Canada cuts rates by 25 basis points: Full text
• ECB minions starting to think they might need better thinking:
  • Explainer: ECB to tackle fundamental questions in strategy assessment
• S&P, Nasdaq snap two-day rout after soft inflation figures, Dow slips to a loss
  • S&P 500, Nasdaq end higher as cool inflation data calms tariff jitters

Thursday, 13 March 2025

• Signs and portents for the U.S. economy:
  • Oil settles down more than 1% on tariff worry, supply-demand expectations
• Fed minions appear set to resume cutting U.S. interest rates in June 2025:
  • Fed seen on course for June start to 2025 rate cuts after data
• Bigger stimulus developing in China:
  • China tells lenders to boost financial support for consumption
• BOJ minions laying the groundwork for rate hike in July 2025, starting to worry about what's on their balance sheet:
  • BOJ set to hold rates this month, hike to 0.75% in Q3, most likely July: Reuters poll
  • BOJ's Ueda upbeat on consumption, warns of 'too big' balance sheet
• ECB minions worried about effects of tariffs on Eurozone economy:
  • ECB's Rehn says U.S. administration must be encouraged to avoid 'very harmful' tariffs
  • German inflation fall offers more room for ECB easing
• Wall Street ends in correction as tariff jitters slam stocks
  • S&P correction: Biggest decliners as index logs first 10% fall from peak since 2023
  • Gold scales record high, sprints towards $3,000 milestone

Friday, 14 March 2025

• Signs and portents for the U.S. economy:
  • Oil set to close week stable as investors mull path to Ukraine ceasefire
• Bigger trouble, stimulus developing in China:
  • China Feb bank lending slows more than expected as US tariffs add to uncertainty
    • China February new bank loans fall to 1.01 trillion yuan, below forecasts
  • Bank of China sets up $7 billion fund to support technology development
  • China set for rapeseed meal shortage after 100% duty on top supplier Canada
• ECB minions suddenly not so sure about where Eurozone inflation is going as Germany to borrow more money to go on spending spree to stimulate its economy:
  • ECB's Holzmann backs holding rates in April on inflation risks
  • "Germany is back": Merz secures key support for debt deal
    • Germany's planned spending spree: what it means for the economy
• Wall St ends sharply higher as selloff prompts dip-buying rally
  • Gold vaults $3,000 in rush for safety from market, political worry

The Atlanta Fed's GDPNow tool's projection of what real GDP growth will be in 2025-Q1 remains unchanged from last week's -2.4%, its next update is set for 17 March 2025. The GDPNow estimate is believed to be sending a false signal given very high imports of gold to the U.S. (originating from Canada, Switzerland, and surprisingly, Hong Kong), which have shown up as imports in trade data, but which have not yet been updated in inventory data tracked by the GDPNow tool. Forecasts of GDP in 2025-Q1 will be revised higher after accounting for the imported gold rush.

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