The S&P 500 (Index: SPX) followed the trajectory associated with investors focusing on 2022-Q3 in the week ending the second quarter of 2022. Unfortunately for investors, that trajectory points downward, so the index ended the week much lower than it began and worse, ended up back in bear market territory.

Not that such an outcome is surprising in the current market environment. If you regularly follow our S&P 500 chaos series, you'll recall the following analysis:

We think investors will, once again, shift their forward-looking attention toward 2022-Q3, because what actions the Fed will take next as it scrambles to get ahead of inflation will hold the focus of investors on this quarter. We've updated the alternative futures chart to add a new redzone forecast range to indicate where stock prices will likely go during the next several weeks, also assuming no deterioration of expected dividends or outbreaks of noise in the market.

In the very short term, that redzone forecast range suggests a higher level for the index, but one that could be relatively short-lived. We peeked ahead at the dividend futures-based model's projections for 2022-Q3, and see that the redzone range continues to drop to roughly where stock prices are today.

Those observations are from 21 June 2022, before any of what we described went on to happen, which is visualized in this chart.

Next week, we'll feature a first look at the dividend futures-based model's projections for 2022-Q3, which will begin with investors focusing on this quarter.

Until then, here's our recap of the past week's market-moving headlines, in which we find the growing potential for recession is commanding the attention of investors.

Monday, 27 June 2022

• Signs and portents for the U.S. economy:
  • U.S. core capital goods orders, shipments increase strongly
  • U.S. pending home sales unexpectedly rebound in May
  • Oil rises $2/bbl after G7 vows new Russian sanctions
• Fed minion says next rate hike should be at least 0.75%
  • Fed's Daly: 75 bps rate hike likely needed in July
• Bigger trouble, stimulus developing in China:
  • China's May industrial profits slump again despite easing COVID curbs
  • Iron ore needs China stimulus action, not just words: Russell
  • China's central bank will continue to support economic recovery -state media
  • Chinese city desperate for home buyers entices villagers with job prospects
• Bigger trouble developing in Russia:
  • Russia pushed into historic default by sanctions
    • The 'Big Package': How Russia was driven to default
• BOJ minions not dealing with elephant in room:
  • BOJ focused on wages, yen at June meeting, no debate on tweaking yield cap
  • On Japan's farms, a weakening yen adds to slow-burning discontent
• ECB minions decide they should wait and think some more before making decisions:
  • ECB shifts back timing of policy decisions, press conferences
• Wall Street closes down, dragged lower by growth stocks

Tuesday, 28 June 2022

• Signs and portents for the U.S. economy:
  • Inflation saps U.S. consumer confidence; house prices remain elevated
  • U.S. consumer confidence index tumbles in June
• Fed minions want higher interest rates, claim they won't cause recession:
  • Fed's Williams: rates need to rise, don't see recession
  • Fed's Daly: growth will slow, but don't expect economy to shrink
• Positive signs, stimulus developing in China:
  • Beijing to reopen schools, Shanghai declares victory over COVID
  • China's economy recovering but foundation not solid, premier says
    • China vows timely policy measures to cope with economic risks
• ECB minions planning to shift deck chairs around Eurozone Titanic:
  • ECB to drain cash in offset to new yield-capping scheme -sources
    • ECB will keep countries on straight and narrow even if it buys their debt - Lagarde
• Wall Street ends sharply lower as consumer pessimism stokes recession fears
  • Bad News' Is Bad news Again: Stocks Slammed on Macro Meltdown, Bonds Shrug

Wednesday, 29 June 2022

• Signs and portents for the U.S. economy:
  • Oil slides 2% on rising U.S. fuel stocks and output
  • Record trade deficit weighs on U.S. economy in first quarter
  • Companies cut spending, jobs as outlook grows less certain
  • U.S. economy contracts in Q1; outlook murky as unsold goods accumulate
• Fed minions really want to hike rates in attempt to contain inflation:
  • Fed's Powell: 'Clock is running' for Fed to bring inflation down
  • Fed's Mester backs 75 bps hike in July if economic conditions remain same - CNBC
    • Fed's Mester: Some risk longer-term inflation expectations continue to rise
• Positive growth signs as China lifts zero-COVID lockdowns, more stimulus developing:
  • China's June factory activity likely expanded for first time in 4 months: Reuters poll
  • China's central bank to step up policy implementation to spur growth
• BOJ minions shout full stimulus ahead!
  • BOJ's Kuroda vows to keep easy policy as Japan less affected by global inflation
    • BOJ may need to adjust yield cap if inflation overshoots - ex central bank official
    • Japan May retail sales rise faster than expected as COVID curbs ease
• ECB minions thinking about how to keep heavily indebted Eurozone governments afloat, see high inflation levels:
  • ECB weighs whether to put number on bond-fighting scheme, sources say
  • Spain's 12-month inflation surpasses 10% in June, first time since 1985
  • German inflation unexpectedly cools off in June at 8.2%
• S&P 500 limps to slightly lower close as quarter-end looms

Thursday, 30 June 2022

• Signs and portents for the U.S. economy:
  • U.S. recession "more likely than not", same for Europe - PIMCO
  • U.S. consumer spending, underlying inflation slowing
  • U.S. employers see signs of cooling job market
• Bigger trouble developing in Japan:
  • Japan's worst factory output slump in two years heaps pressure on economy
• Bigger stimulus developing in China, biggest lift from ending government COVID lockdowns:
  • China needs to keep options to cut RRR, rates while waiting for bounce, says ex-regulator
  • Chinese homebuilders skirt discount limits with 'fancy' promotions -report
  • China's factory, service sectors shake off 3 months of lockdown pain
• ECB minions thinking about developing Eurozone recession as unemployment reaches record low; develop scheme to keep indebted Eurozone countries from imploding:
  • Recession fears creep into ECB thinking at summer conference
    • ECB to ask banks to calculate with recession risk: Enria
    • Europe stares at 'stagflation', says UBS
  • Euro zone unemployment falls to new record low of 6.6% in May
    • German unemployment rises in June as Ukrainian refugees look for work
  • Exclusive-ECB to channel cash from north to south in bid to cap spreads - sources
• S&P 500 closes the book on its biggest first-half plunge since 1970
  • Stocks sink on fears for global economy, capping worst H1 on record
  • 10Y Yields Tumbles Back Below 3.00%, Stocks Slammed

Friday, 1 July 2022

• Signs and portents for the U.S. economy:
  • U.S. factory activity slows to two-year low as clouds gather over economy
  • U.S. construction spending unexpectedly falls in May
  • U.S. housing hold-ups put thousands of jobs on the line
• Post-COVID lockdown recovery signs in China:
  • China's June factory activity expands at fastest pace in 13 months - Caixin PMI
  • China new home price rises at slightly faster pace in June - private survey
• Bigger trouble developing in the Eurozone:
  • Euro zone factory production falls in June for first time in two years -PMI
  • Drop in demand weighs on German manufacturing, outlook darkens -PMI
  • French manufacturing under pressure as new orders fall-PMI
  • Italy June manufacturing growth slowest for two years -PMI
  • Spanish factory activity grows in June at slowest pace in 17 months -PMI
• Central banks hiking rates to get ahead of inflation, others not so much:
  • Nordic central banks join the 50 bps rate hike club
  • Indonesia central bank in no rush to hike rates as inflation hits 5-yr high
• BOJ minions developing a credibility problem:
  • Japan Inc. disagrees with BOJ's view cost-push inflation will be temporary
• ECB minions thinking about rate hikes again:
  • Another inflation record firms case for bigger ECB rate hikes
• Wall Street ends first day of third quarter with solid rebound

The CME Group's FedWatch Tool is still projecting half point rate hikes for both July and September 2022 (2022-Q3) with quarter point rate hikes at six-week intervals after that through 2022-Q4 and 2023-Q1, topping out in a range between 3.50 and 3.75% in February 2023. After that, the tool now projects quarter point rate cuts in both March (2023-Q1) and May (2022-Q2), anticipating a recession requiring that action.

Speaking of which, the Atlanta Fed's GDPNow tool now projects real GDP will shrink by 2.1% for the just ended quarter of 2022-Q2, falling that much from last week's zero growth reading. U.S. Treasury Secretary Janet Yellen's "two quarters of negative growth as a good rule of thumb to indicate a recession" may have been met in the first half of 2022.

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