S&P 500 Ends Best First Half Since 1997

The S&P 500 (Index: SPX) didn’t set any new records in the final week of 2019-Q2, but was still high enough to make the first half of 2019 the best for the index since 1997. Which is particularly impressive because that period saw what became known as the Dot Com Bubble begin to inflate.

Rather than look backwards however, let’s look forward in time, through what our dividend futures-based model portends for the S&P 500 in 2019-Q3.

The key to the S&P 500 remaining elevated during the quarter will be for investors to continue maintaining their forward looking focus on 2020-Q1. News that might force investors to shift their attention toward 2019-Q3 or 2019-Q4 will be associated with a significant decline in stock prices, while a shift in their forward-looking focus toward 2020-Q2 would be accompanied by a serious decline in stock prices.

As for what might cause investors to shift their focus to that particularly dismal future quarter, a lot will hinge on whether investors come to anticipate the Fed hiking interest rates a fourth time, with currently one quarter point hike each seemingly set for the next three quarters, at least, according to the Friday, 28 Juen 2019 snapshot of the CME Group’s FedWatch Tool:

Here are the headlines we extracted from the flow of news in the final week of 2019-Q2.

Monday, 24 June 2019

• Oil mixed on crude demand fears and U.S.-Iran tensions
• Bigger stimulus developing in China all over:

• China central bank says lending small firms jumps 21 percent in January-May
• China’s benchmark overnight repo rate falls to lowest in a decade

Trump says Fed ‘blew it’: Twitter

S&P 500 slips as healthcare drags, investors eye G20 summit

Tuesday, 25 June 2019

• Oil prices mixed ahead of U.S. crude stock data
• Fed pushes back on aggressive U.S. rate cut views

• Fed’s Bullard says he doesn’t see need for half-point rate cut: Bloomberg interview
• Powell says Fed is insulated from U.S. political pressure

• Instant view: Powell – Fed is ‘insulated’ from short-term political pressure
• How insulation worked in December 2018? Fischer: Powell hiked rate because Trump said he shouldn’t
• Gold soars to six-year high, stocks slide after Powell speech

Wall Street sinks as hopes fade for rate cuts, trade progress

Wednesday, 26 June 2019

• Oil prices rise on drop in U.S. crude stocks, refinery outage
• Bigger stimulus developing in China:
• China to roll out measures to cut smaller firms’ financing costs
• Trump says Fed should cut U.S. rates; Powell doing ‘bad job’

• Fed’s Daly says next weeks key to weighing case for rate cuts

False alarm/bad reporting: U.S. Treasury Secretary says U.S.-China trade deal is 90% done: CNBC – this news boosted stock futures until investors noticed that Secretary Mnuchin had really said something slightly, but significantly different than what the headlines claimed he said.

S&P 500 dips as healthcare declines counter tech gains

Thursday, 27 June 2019

• Oil edges higher ahead of G20, OPEC meeting
• U.S. 30-year mortgage rates fall to lowest since November 2016: Freddie
• Mixed signals from China:

• Bad: China’s June factory PMI seen in contraction as demand falters: Reuters poll
• Good: China’s industrial profits rise 1.1% in May as sales quicken
• Bigger stimulus coming: China central bank pledges to support growth as global risks rise

Truce developing in U.S.-China tariff war?

• No preconditions in trade talks with China: White House’s Kudlow
• China’s Xi to present Trump with terms for settling trade fight: WSJ, citing Chinese officials
• Trump decision on China tariffs depends on Xi meeting: U.S. official

S&P 500 rises on investor optimism ahead of G20 summit

Friday, 28 June 2019

• Oil prices fall, but post weekly gain ahead of G20 talks, OPEC
• U.S.-China trade talks: where they are and what’s at stake
• Odd man out: Fed’s Kaplan isn’t ready to cut interest rates: Fox Business Network
• Wall Street wraps up its best June in decades as G20 convenes

• Halfway through 2019, tech leads on Wall Street

Elsewhere, Barry Ritholtz identifies 6 positives and 6 negatives in his review of the last week of 2019-Q2′s major economic and market-related news.