2019 is proving to be an active year for fans of Lévy flight events in the stock market! The S&P 500 (Index: SPX) completed its fifth Lévy flight of the year on Friday, September 6, 2019, as investors completed shifting the time horizon of their future-linked attention from 2019-Q4 outward to 2020-Q1.
We think that investors have shifted their forward-looking focus to 2020-Q1 because that is when the CME Group's FedWatch Tool sees some degree of uncertainty regarding the prospects of a third quarter point rate cut taking place within the upcoming months that are visible within their current time horizon:
Here are the dates we've identified for the timing of the S&P 500's Lévy flight for the year-to-date, along with what our observations of what dividend futures-based model indicates investors were shifting their forward-looking focus from one future quarter to another:
- 07-Jan-2019 to 14-Jan-2019: Inward shift from 2019-Q3 to 2019-Q1, stock prices rise from 2,549.69 to 2,582.61
- 17-May-2019 to 31-May-2019: Inward shift from 2020-Q1 to 2019-Q4, stock prices fall from 2,859.53 to 2,842.98
- 05-Jun-2019 to 10-Jun-2019: Outward shift 2019-Q4 to 2020-Q1, stock prices rise from 2,826.03 to 2,886.98
- 31-Jul-2019 to 05-Aug-2019: Inward shift from 2020-Q1 to 2019-Q4, stock prices fall from 2,980.38 to 2,844.74
- 28-Aug-2019 to 06-Sep-2019: Outward shift from 2019-Q4 to 2020-Q1, stock prices rise from 2,887.94 to 2,978.71
Technically, there was a sixth Lévy flight that occurred near the end of 2019-Q1, as the clock for that quarter ran out and investors shifted their focus toward 2020-Q1. Unlike the other Lévy flight events listed above however, there was very little difference in the expected change in the year-over-year growth rate of dividends projected in 2019-Q1 and in 2020-Q1, which is why stock prices didn't significantly alter their trajectory as they did during all these other, more noticeably volatile events.
Meanwhile, the random onset of new information is what often prompts investors to shift their forward-looking attention from one point of time to another. Here are the headlines we noted in the first week of September 2019 for their market-moving potential.
Tuesday, September 3, 2019
- Oil slides as U.S., China add more tariffs in trade war
- Bigger trouble developing
in Chinaall over:
- Central bank minions leaning against future rate cuts, QE:
- Wall Street pushed down by weak data, trade worries
Wednesday, September 4, 2019
- Oil prices rise over 4% on positive economic data from China
- China service sector activity rises to three-month high-Caixin PMI
- Dovish Fed minions take their turn in the spotlight:
- Fed's Williams says will act as appropriate to keep economy on track
- Fed's Kaplan says will assess data right up to September meeting
- Fed's Kashkari: Rate cuts a 'poor tool' to undo trade war harm
- Fed's Evans says limits on trade, immigration could slow U.S. growth
- U.S. economy growing modestly as trade war dents activity: Fed
- Wall Street rises on strong Chinese data, Hong Kong and Brexit news
Thursday, September 5, 2019
- Oil little changed as U.S. crude stockdraw countered by demand fears
- U.S. 30-year mortgage rates hit lowest since October 2016: Freddie Mac
- Bigger trouble developing in China all over:
- U.S., China agree to resume trade talks, markets jump
- Stocks rally, Treasury yields rise on easing trade fears
Friday, September 6, 2019
- Oil jumps after Fed says it will act to sustain U.S. growth
- Fed Chair Powell repeats vow to act 'as appropriate'
- Bigger trouble developing all over:
- Bigger stimulus developing in China all over:
- The S&P 500 inches higher, Treasury yields dip after Powell remarks, jobs report
Barry Ritholtz succinctly summarizes seven positives and seven negatives he found in the week's economics and market-related news over at the Big Picture.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.