The S&P 500 (Index: SPX) closed out the first quarter of 2023 on a high note, rising 1.4% on Friday, 31 March 2023 to end the week up by 3.5% from its previous week's close. The index concluded the quarter at a level of 4,109.31.

With the new assumption of the amplification multiplier incorporated into the dividend futures-based model, the latest update to the alternative futures chart indicates the trajectory of the S&P 500 is consistent with investors focusing their attention on the current quarter of 2023-Q2.

That makes sense because this quarter is when investors expect the Federal Reserve may significantly alter its future course. It will almost certainly contain the peak of the Fed's year-long series of rate hikes, and it may include the Fed's first rate cuts since the arrival of the Coronavirus Pandemic in 2020. Here's the chart:

Reports of cooling inflation as measured by Personal Consumption Expenditures (PCE) on Friday, 31 March 2023 were credited with the market's positive reaction. Here are the week's market-moving headlines:

Monday, 27 March 2023

• Signs and portents for the U.S. economy:
  • How the 2023 banking crisis unfolded
    • How First Republic's courtship of the wealthy led to meltdown
  • U.S. bank regulators say system is sound, but rules need review
    • U.S. will keep using tools to prevent banking contagion as needed -Treasury
  • Oil rises over $3 on Kurdistan export halt, banking optimism
• Fed minions make connection between banking crisis and recession:
  • Banking stress brings U.S. closer to recession, Kashkari says
• Bigger trouble developing in China, Eurozone:
  • China's industrial profits slump deepens on soft demand, high costs
  • In inflation-hit Germany, massive strike over pay to cripple transport
    • Largest strike in decades brings Germany to a standstill
    • Germany at a standstill as huge strike halts planes and trains
• Bigger stimulus developing in China:
  • China issues preferential tax policy for small firms, household businesses
• ECB minions see less lending, growth:
  • Euro zone lending slows again in Feb, ECB says
• Wall St equities gain, Treasury yields rise as bank worries ease

Tuesday, 28 March 2023

• Signs and portents for the U.S. economy:
  • Bankers at US midsize lenders battle to keep deposits after exodus
    • US consumer bankers tighten monitoring, processes as industry reels
    • US regulator cites 'terrible' risk management for Silicon Valley Bank failure
  • Oil extends gains on Kurdish supply risks, banking relief
  • US goods trade deficit widens as exports decline
  • US consumer confidence rises as Americans shrug off bank failures
• Bigger trouble developing among China's "Belt and Road" client countries:
  • China spent $240 billion bailing out 'Belt and Road' countries - study
• BOJ minions getting ready to roll out digital yen:
  • Kuroda says BOJ needs to be ready to issue digital yen
• ECB minions have a new problem:
  • Explainer-What are credit default swaps and why are they causing trouble for Europe's banks?
• Wall Street ends down with tech; investors assess bank comments

Wednesday, 29 March 2023

• Signs and portents for the U.S. economy:
  • Banking turmoil means recession fears are creeping back
    • Column-Shadow bank boxing as money funds drain deposits: Mike Dolan
    • S&P sees corp high-yield default rate doubling by year end
  • US pending home sales rise for third straight month; loan demand increases
    • US mortgage refinancings hit 6-month high on rates drop, MBA says
  • Oil dips on profit taking, markets debate supply tightness
  • U.S. retail sales to grow at slower pace in 2023 - NRF
• Bigger trouble developing in China:
  • China's factory activity likely expanded at a slower pace in March - Reuters poll
• BOJ minions thinking about changing up never-ending stimulus policy:
  • BOJ's new deputy chief flags chance of change to yield control policy
• ECB minions thinking they might have a sticky inflation problem:
  • Euro zone underlying inflation sticky, ECB's Schnabel says in Washington
• Wall Street jumps with rosy outlooks from companies

Thursday, 30 March 2023

• Signs and portents for the U.S. economy:
  • Signs of pain as easy cash era ends are growing
  • U.S. labor force gap mostly due to pre-pandemic trends, study finds
• Fed minions may have a bank oversight problem, say they won't cut rates in 2023:
  • Silicon Valley Bank and Fed supervisors: what's known so far
    • Analysis-US bank supervision needs more speed, transparency in wake of SVB debacle, critics say
  • Fed's Collins: Getting inflation down argues for no rate cuts this year
    • Fed officials keep rate hike door open, say bank stress may weigh on outlook
• Bigger trouble developing in Asia:
  • South Korea March exports likely to see steepest decline in nearly three years - Reuters poll
  • Thai exports drop less than expected, rebound not seen until H2
  • Analysis-Hiring spree by China's debt-laden local governments fuels fiscal fears
• Positive developments in the Eurozone:
  • German supply chain shortages ease but long way to go - ifo
  • German inflation eases less than expected in March
  • Spain inflation falls more than expected to 3.3% in March
• Wall St gains with tech shares; regional banks fall

Friday, 31 March 2023

• Signs and portents for the U.S. economy:
  • U.S. consumer spending slows in February; inflation cooling
    • Instant View: US Feb PCE price index shows inflation keeps cooling
• U.S. Social Security fund seen depleted 2033, year earlier than previous estimate
• Fed minions thinking about what direction they'll go next:
  • Fed's Williams says financial conditions key to rate policy outlook
  • Fed's Collins says latest inflation data doesn't change policy path yet
• Positive signs for inflation in Eurozone:
  • German import prices show smallest annual increase in two years
  • French inflation eases to six-month low in March
• Bigger trouble developing in China:
  • Slower China factory activity growth challenges economic recovery prospects
• BOJ minions see inflation fall, but remain above target:
  • Tokyo inflation cools for second month, but exceeds BOJ target
• Eurozone seeing lower inflation are pressures, but ECB minions thinking they need to keep rate hikes going:
  • German import prices show smallest annual increase in two years
    • French inflation eases to six-month low in March
  • Stubborn inflation keeps ECB on course for more rate hikes
• Indexes jump on inflation data; Nasdaq posts best qtr since 2020

The CME Group's FedWatch Tool has put nearly even odds of the Fed hiking the 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 July (2023-Q3) and continuing through December (2023-Q4), with the Federal Funds Rate declining to a target range of 4.25-4.50%. In 2024, the FedWatch tool foresees more rate cuts, with the Federal Funds Rate reaching a target range of 3.25-3.50% in September (2024-Q3).

The Atlanta Fed's GDPNow tool's projection for real GDP growth in the first quarter of 2023 dropped to +2.5% from the previous week's estimate of +3.2%. With the end of the first calendar quarter of 2023, the GDP indicator is now fully looking backward instead of forward.

Next week, we'll roll out a new chart showing how the dividend futures model anticipates the future for the S&P 500 will look like during 2023-Q2. But we're happy to spoil it by noting it will look a lot like 2023-Q1 given current assumptions and expectations!

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