The S&P 500 Rebounds For Best Week Of 2024
There's one thing we know for sure about stock price volatility. Big moves, whether up or down, tend to be clustered together.
During the last several weeks, a new cluster of volatility formed in the U.S. stock market. The S&P 500 (Index: SPX) experienced a large downward move after being triggered by a noise event that arose in Japan's stock market. That event was followed by a week of recovery, which in turn, has been followed in the past week by large upward moves in the level of the S&P 500.
By the closing bell on the trading week ending on Friday, 16 August 2024, the index rose to 5,554.25, more than 210 points and 3.93% higher than where it closed in the previous week. The upward moves coincided with the arrival of new information suggesting the perceived risk of recession in the U.S. economy is much lower than other data signaled just a few weeks earlier.
The result was several unusually large upward moves in the level of the S&P 500, which are captured in the latest update to the dividend futures-based model's alternative futures chart.
Assuming investors are still focusing on the distant future quarter of 2025-Q2 as they have in the last several weeks, these upward movements have put the trajectory into the upper part of the redzone forecast range we've added to the alternative futures chart. This forecast range runs through 1 November 2024 and is based on the assumption that investors will shift their forward looking attention toward the nearer term future of 2024-Q1 as we get closer to the end of 2024.
We've added this new forecast range because we've entered a period where we know in advance the dividend futures-based model's projections will be affected by the echoes of the past volatility of stock prices for a prolonged period. This situation arises a result of the model's use of historic stock prices as the base reference points from which it projects their future. When that historic data captures previous volatility in stock prices, it skews the model's projected future for stock prices. We compensate for this echo effect by bridging across the period in which we know the past volatility of stock prices will affect the model's raw projections, which we show on the chart using a red-shaded forecast range.
But enough about dry technical details. Here's our summary of the past week's market-moving headlines, which we present to document the random onset of new information that investors absorbed as they went about setting the level of stock prices during the week that was.
Monday, 12 August 2024
- Signs and portents for the U.S. economy:
- Fed minions don't say "recession" but claim rate cuts will be needed if inflation falls:
- Bigger bond market bailout developing in China:
- Nasdaq, S&P, and Dow finished mixed as investors await inflation data
Tuesday, 13 August 2024
- Signs and portents for the U.S. economy:
- Fed minions still signaling U.S. interest rate cuts are coming soon:
- Bigger trouble, stimulus developing in China:
- BOJ minions to get a stern talking to:
- Nasdaq ends up 2%, S&P, Dow rise as cooling wholesale inflation feeds rate-cut views
Wednesday, 14 August 2024
- Signs and portents for the U.S. economy:
- Bigger trouble, stimulus developing in China:
- More central banks start cutting their domestic interest rates:
- S&P 500 ends up, win streak at 5; Nasdaq ekes out gain even as Alphabet weighs
Thursday, 15 August 2024
- Signs and portents for the U.S. economy:
- Fed minions starting to get rate cut mania:
- Bigger trouble developing in China:
- BOJ minions get data they really didn't want to get, expected to roll over under pressure from JapanGov minions:
- Nasdaq closes up 2%, S&P, Dow advance as growth view brightens; Walmart soars
Friday, 16 August 2024
- Signs and portents for the U.S. economy:
- Fed minions claim they don't want to tighten monetary policy longer than they need to:
- Bigger trouble, stimulus developing in China:
- Central banks signaling more rate cuts to come:
- Dow, S&P, Nasdaq finish in the green, mark strongest week so far in 2024
The CME Group's FedWatch Tool continues to anticipate the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 18 September (2024-Q3). On that date, the Fed is expected to start a series of 0.25% rate cuts that will occur at six-week intervals well into 2025.
The Atlanta Fed's GDPNow tool's projection of the real GDP growth rate for the current quarter of 2024-Q3 dropped to +2.0% from its forecast of +2.9% growth a week earlier.
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