The S&P 500 Recovers Losses As Geopolitical Noise Dissipates

Summary

  • The S&P 500 quickly recovered from the outbreak of geopolitical noise originating from the Eurozone in the previous week, rising 143.10 points (+3.6%) to end the Labor Day Holiday-shortened trading week at 4,067.36.
  • The change puts the level of the index back within the typical range anticipated by the dividend futures-based model for investors focusing on the current quarter of 2022-Q3.
  • In the first week of September 2022, the inevitable outcome to Germany's bad policies threatened to bleed out into the global economy, which created the negative noise event causing stock prices to drop to "deeply undervalued territory".

Financial, stock exchange charts at digital display

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The S&P 500 (Index: SPX) quickly recovered from the outbreak of geopolitical noise originating from the Eurozone in the previous week, rising 143.10 points (+3.6%) to end the Labor Day Holiday-shortened trading week at 4,067.36.

The change puts the level of the index back within the typical range anticipated by the dividend futures-based model for investors focusing on the current quarter of 2022-Q3. The latest update to the alternative futures chart shows that development.

Alternative Futures - S&P 500 - 2022Q3 - Standard Model (m=-2.5 from 16 June 2021) - Snapshot on 9 Sep 2022

With the geopolitical noise tied to energy demand and the very short supply of fossil fuels in Germany, the trigger for dissipating the noise can be traced to a decision by Germany's government to continue operating two nuclear power generating stations it previously planned to shutter without replacement by the end of this year.

The sudden reversal of its anti-nuclear power policies greatly reduced the country's projected developing shortage of fossil fuels in the short term, which threatened to throw the country into deep recession from its poorly considered energy policies.

In the first week of September 2022, the inevitable outcome to Germany's bad policies threatened to bleed out into the global economy, which created the negative noise event causing stock prices to drop to "deeply undervalued territory". But all noise events end, it was only ever a question of when. Germany's energy policy U-turn was the week's main market-moving event.

Of course, other stuff happened too. Here's our summary of the week's lesser market-moving headlines:

Tuesday, 6 September 2022

Wednesday, 7 September 2022

Thursday, 8 September 2022

Friday, 9 September 2022

The CME Group's FedWatch Tool still anticipates a three-quarter point rate hike in September (2022-Q3), but now projects a half-point rate hike in November (2022-Q4), followed by a quarter-point rate hike in December 2022.

In 2023, the FedWatch tool predicts one last quarter-point rate hike in March (2023-Q1), with the Fed's series of rate hikes topping out in a target range of 4.00-4.25%. The FedWatch tool then forecasts the Fed will be forced to respond to developing recessionary conditions by announcing a quarter-point rate cut in June (2023-Q2).

The Atlanta Fed's GDPNow tool's forecast for real GDP growth in 2022-Q3 plunged 2.6% to 1.3% over the past week, fully reversing the growth surge it predicted a week ago.

Original Post

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

This article was written by

Ironman is the alias of the blogger at Political Calculations, a site that develops, applies and presents both established and cutting edge theory to the topics of investing, business and economics. We should acknowledge that Ironman is either formerly or currently, and quite possibly, simultaneously employed as some kind of engineer, researcher, analyst, rocket scientist, editor and perhaps as a teacher of some kind or another. The scary thing is that's not even close to being a full list of Ironman's professions and we should potentially acknowledge that Ironman may or may not be one person. We'll leave it to our readers to sort out which Ironman might behind any of the posts that do appear here or comments that appear elsewhere on the web!

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