USMC - The S&P 500 Ends 2022 Back In Bear Territory
Summary
- After starting at its all-time record high, the S&P 500 dropped into bear territory in 2022.
- On the final trading day of 2022, the CME Group's FedWatch Tool was still projecting just a quarter-point rate hike at both the Fed's upcoming 1 February and 22 March (2023-Q1) meetings.
- The "Blue Chip consensus" continues to project just over 1% real economic growth for the current quarter of 2022-Q4.
After starting at its all-time record high, the S&P 500 (Index: SPX ) dropped into bear territory in 2022, spending much of the time during the year bouncing around the 20% decline threshold that defines bear territory. The last two weeks of the year were no different, with the index closing out 2022 right at the bear territory threshold .
The final update to the alternative futures chart for 2022-Q4 shows the index experienced one more Lévy flight event in 2022, with investors shifting their forward-looking focus from 2023-Q1 outward to the more distant future quarter of 2023-Q2.
Standard & Poor's, CBOE, IndexArb, Author's Calculations
Given the closeness of the dividend futures-based model 's projections for 2023-Q2, 2023-Q3, and 2023-Q4, it's possible investors have shifted their attention to more distant future quarters. But with the actual trajectory of the S&P 500 still within the range of values, we would expect it to be for investors focusing on 2023-Q2, we cannot yet rule that possibility out.
Not that it would take long to get that picture sorted out. The market-moving headlines of the last two weeks point to the expected timing of the peak of the Fed's series of rate hikes (2023-Q2) and the increasingly expected arrival of recession in the second half of 2023 as the factors that will set how far forward in time investors set their time horizons. Here are the headlines:
Monday, 19 December 2022
- Signs and portents for the U.S. economy:
- Fed minions trying to sell "recessions" as a real adjective:
- Bigger trouble developing in Asia, Australia, Africa:
- Chinese business confidence falls to lowest in almost a decade on COVID
- Taiwan's export orders seen contracting at faster pace in Nov- Reuters poll
- South Korea flags economic slump deepening for while
- Australia's housing crisis, largely hidden, is getting worse
- Ghana to default on most of external debt as economic crisis worsens
- BOJ minions may be forced to end never-ending stimulus:
- ECB minions worried ECB may lose more credibility:
- Wall St posts fourth straight drop, Treasury yields rise as recession fears weigh
Tuesday, 20 December 2022
- Signs and portents for the U.S. economy:
- Oil prices settle higher on weak dollar, worries U.S. winter storm could cut travel
- Private debt markets face reality check as companies grapple with rising rates, recession
- Higher mortgage rates depress U.S. single-family housing starts, building permits
- U.S. feeling impact of China COVID changes, can 'power through it' -Treasury's Adeyemo says
- Fed minions say consumer cost of renting is rising more slowly:
- Better than expected economic news in the Eurozone:
- Bigger trouble developing in China:
- BOJ minions dial back a small portion of never-ending stimulus:
- Wall St closes slightly higher after four-day sell off
Wednesday, 21 December 2022
- Signs and portents for the U.S. economy:
- Bigger trouble developing in China:
- BOJ minions "shock" move may signal beginning of end of never-ending stimulus:
- Wall Street advances with help from Nike, FedEx and consumer sentiment
Thursday, 22 December 2022
- Signs and portents for the U.S. economy:
- Oil falls by $1/bbl as rate hike fears outweigh tighter U.S. stockpiles
- Low weekly jobless claims underscore U.S. labor market tightness; Q3 growth revised up
- The whack-a-mole economy: U.S. manufacturers struggle with unpredictable supplies
- Factbox: Corporate America lays off thousands as recession worries mount
- Micron Joins Intel, Other Chipmakers to Lay Off Thousands of Workers Despite Billions in Federal Subsidies
- Fed minions shocked at inflated jobs data aren't expected to shrink balance sheet for long:
- Bigger trouble developing in the Eurozone:
- ECB minions thinking about keeping rate hikes going:
- Wall Street tumbles on rate, recession worries, bleak chipmaker outlook
Friday, 23 December 2022
- Signs and portents for the U.S. economy:
- Oil rises $3/bbl after Russia signals output cut due to price cap
- IRS delays $600 income reporting rule for U.S. gig workers
- U.S. consumer spending, inflation rise moderately amid rate hikes
- U.S. consumers' 1-year inflation outlook drops to 18-month low - UMich
- U.S. new home sales increase again in November
- Bigger stimulus developing in China:
- Central bank minions give each other high fives all around:
- Fiscal stimulus rolling out in Japan as factories slow and inflation hits 40-year high:
- Wall Street ends up as investors eye data for rate prospects, energy outperforms
Tuesday, 27 December 2022
- Signs and portents for the U.S. economy:
- Bigger trouble, stimulus developing in China:
- Smaller trouble developing in the Eurozone:
- S&P 500, Nasdaq close lower, weighed by growth stocks
Wednesday, 28 December 2022
- Signs and portents for the U.S. economy:
- Bigger trouble developing in Japan, BOJ minions debating what they'll do in 2023, JapanGov minion wants higher wages to keep up with inflation:
- Bigger trouble still developing in China:
- U.S. stocks end lower on mixed economic data, recession fears
Thursday, 29 December 2022
- Signs and portents for the U.S. economy:
- Bigger stimulus developing in China:
- Bigger trouble developing in the Eurozone:
- Wall Street surges in dip-buying rally, oil falls
For further details see:
The S&P 500 Ends 2022 Back In Bear Territory