HIBL - The S&P 500 Rises As Inflation Cools
2023-04-03 18:41:00 ET
Summary
- The S&P 500 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.
- Reports of cooling inflation as measured by Personal Consumption Expenditures on Friday, 31 March 2023 were credited with the market's positive reaction.
- 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%.
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:
- Fed minions make connection between banking crisis and recession:
- Bigger trouble developing in China, Eurozone:
- Bigger stimulus developing in China:
- ECB minions see less lending, growth:
- Wall St equities gain, Treasury yields rise as bank worries ease
Tuesday, 28 March 2023
- Signs and portents for the U.S. economy:
- Bigger trouble developing among China's "Belt and Road" client countries:
- BOJ minions getting ready to roll out digital yen:
- ECB minions have a new problem:
- Wall Street ends down with tech; investors assess bank comments
Wednesday, 29 March 2023
- Signs and portents for the U.S. economy:
- Bigger trouble developing in China:
- BOJ minions thinking about changing up never-ending stimulus policy:
- ECB minions thinking they might have a sticky inflation problem:
- Wall Street jumps with rosy outlooks from companies
Thursday, 30 March 2023
- Signs and portents for the U.S. economy:
- Fed minions may have a bank oversight problem, say they won't cut rates in 2023:
- Bigger trouble developing in Asia:
- Positive developments in the Eurozone:
- Wall St gains with tech shares; regional banks fall
Friday, 31 March 2023
- Signs and portents for the U.S. economy:
- U.S. Social Security fund seen depleted 2033, year earlier than previous estimate
- Fed minions thinking about what direction they'll go next:
- Positive signs for inflation in Eurozone:
- Bigger trouble developing in China:
- BOJ minions see inflation fall, but remain above target:
- Eurozone seeing lower inflation are pressures, but ECB minions thinking they need to keep rate hikes going:
- 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!
For further details see:
The S&P 500 Rises As Inflation Cools