S&P Completes Second Lévy Flight Event Of 2019

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Includes: DMRL, EPS, IVV, PPLC, RSP, RVRS, RYARX, SDS, SFLA, SH, SPDN, SPLX, SPUU, SPXE, SPXL, SPXN, SPXS, SPXT, SPXU, SPXV, SPY, SSO, UPRO, USMC, VFINX, VOO
by: Ironman at Political Calculations
Summary

In closing the week at a value of 2,752.06 on Friday, 31 May 2019, the S&P 500 completed its second Lévy flight event of 2019.

Unlike the year's first Lévy flight event back in January, which was a positive affair, the second Lévy flight for the S&P 500 saw stock prices fall as investors shifted their forward looking focus from the distant future quarter of 2020-Q1 and the more positive expectations associated with it back toward the nearer term quarters of 2019-Q3/Q4.

The CME Group's FedWatch Tool confirms investors have shifted their attention toward the nearer term, as they are now betting that the Fed will cut its Federal Funds Rate in both the third and fourth quarters of 2019.

In closing the week at a value of 2,752.06 on Friday, 31 May 2019, the S&P 500 (Index: SPX) completed its second Lévy flight event of 2019.

Unlike the year's first Lévy flight event back in January, which was a positive affair, the second Lévy flight for the S&P 500 saw stock prices fall as investors shifted their forward looking focus from the distant future quarter of 2020-Q1 and the more positive expectations associated with it back toward the nearer term quarters of 2019-Q3/Q4. The shift took place as the S&P 500 fell by 124.26 points (4.3%) in the 10 trading days between 16 May 2019 and 30 May 2019. Our alternative futures spaghetti forecast chart captured the shift as it happened:

As Lévy flights go, this new event was a pretty mild one in that it took 10 days for the trajectory of the S&P 500 to traverse the relatively short distance between the alternate trajectories our dividend futures-based model has been projecting for 2020-Q1 and for 2019-Q3/Q4, where we're not differentiating between these two earlier quarters because their forecast trajectories are nearly identical.

The CME Group's FedWatch Tool confirms investors have shifted their attention toward the nearer term, as they are now betting that the Fed will cut its Federal Funds Rate in both the third and fourth quarters of 2019.

As for that flow of news that pushed investors to focus on 2019-Q3 and 2019-Q4 and the expectations for stock prices associated with these quarters, here are the headlines that moved stock prices during the fifth and final week of May 2019.

Tuesday, 28 May 2019

Wednesday, 29 May 2019

Thursday, 30 May 2019

Friday, 31 May 2019

Elsewhere, Barry Ritholtz counted up positives and negatives he found among the week's major economic and market-related news, so if these headlines weren't enough for you, there are more out there!

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.