The S&P 500 Rebounds As Reasons For Continuing Rate Hikes Lose Steam

The S&P 500 rose to end the trading week at 4137.64, up 0.8% from the previous week's close.

The main factor in the week's market moving headlines pointing to that outcome is the increasingly likelihood that the Federal Reserve's series of rate hikes that began back in March 2022 are much closer to being over. Better-than-expected inflation reports during the week and an increasingly likelihood of recession are instead raising the prospect the Federal Funds Rate will reach a peak target range of 5.00-5.25% in May 2023, which investors are betting will transition into a series of rate cuts starting as early as July 2023.

We've updated the alternative futures chart to show a new redzone forecast range that runs from 10 April 2023 through 18 July 2023, during which we assume investors will transition their focus from the current quarter of 2023-Q2 to the more distant future quarter of 2023-Q3. We anticipate a higher volatility for stock prices may apply during this period, which we're indicating with a wider forecast range of ±4% rather than a typical ±3%.

(Click on image to enlarge)

Alternative Futures - S&P 500 - 2023Q2 - Standard Model (m=+1.5 from 9 March 2023) - Snapshot on 14 Apr 2023

Here's our weekly summary of those market-moving headlines we mentioned earlier.


Monday, 10 April 2023


Tuesday, 11 April 2023


Wednesday, 12 April 2023


Thursday, 13 April 2023


Friday, 14 April 2023

The CME Group's FedWatch Tool estimates a 83% chance the Fed will Federal Funds Rate by a quarter point to a target range of 5.00-5.25% at its upcoming meeting on 3 May (2023-Q2). After that, the FedWatch tool anticipates a series of quarter point rate cuts starting from 26 July (2023-Q3) and continuing at six-to-twelve-week intervals through the CME FedWatch tool's available forecast period, which extends through 25 September 2024 (2024-Q3). The CME FedWatch Tool's most distant forecast anticipates the Federal Funds Rate will reach a target range of 2.75-3.00% at that date.

The Atlanta Fed's GDPNow tool's projection for real GDP growth in the first quarter of 2023 rebounded to +2.5% from the previous week's estimate of +1.5%. The so-called Blue-Chip consensus predicts it will be +1.5%, or rather, that's the average of ten forecasts that anticipate real GDP growth anywhere from +0.3% to +2.5% for 2023-Q1). The GDPNow tool is now fully looking backward instead of forward and will continue to do so until the U.S. Bureau of Economic Analysis releases its advance estimate of real GDP on 27 April 2023.

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