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The S&P 500 Rebounds to New Record High as Heightened Volatility Confirmed

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Given all the issues that are dominating the news, would you have guessed the S&P 500 (Index: SPX) would reach a new record high?

The index closed at a record high of 4,549.78 on Thursday, 21 October 2021, which puts the trajectory of the index into the upper half of the latest redzone forecast range:

Alternative Futures - S&P 500 - 2021Q3 - Standard Model (m=-2.5 from 16 June 2021) - Snapshot on 22 Oct 2021

Sharp-eyed readers will catch that the trajectory of the range has itself shifted upward, which is a result of the ‘dynamic’ method we use to set it. When we bridge across periods where the echoes of past volatility in stock prices affect the dividend futures-based model‘s projections, the past end of the range is fixed while the future end ‘floats’ with changes in expectations.

For the chart, the rising expectations for the future now means parts of the S&P 500′s actual trajectory that were once within the redzone forecast range now fall outside of it. That’s visible by design in this period because we set the total width of this forecast range to be plus-or-minus three percent of the historic typical level of volatity for stock prices.

Under typical volatility levels, the trajectory of the index should generally fall well within that statistically-determined range. But as the chart visually confirms, the market is experiencing greater than typical levels of volatility.

For us, what that means is that when we get around to projecting the S&P 500′s future trajectory for 2021-Q4, we’ll need to generate a new redzone forecast, since today’s stock prices will become the base reference points from which we project the future for the index in that period. The echoes of today’s volatility will affect the accuracy of the dividend futures-based model’s projections a year from now.

The market moving headlines of the week point to several contributing factors for what new information has contributed to improving the outlook for investors. Pay particular interest to the signs and portents for the U.S. economy in the latter half of the week that was:

Monday, 18 October 2021
  • Signs and portents for the U.S. economy:
  • ‘Enough’s enough’: tight U.S. job market triggers strikes for more pay
  • Oil prices ease off highs as U.S. factory data weighs on market
  • Chip shortages, Hurricane Ida weigh on U.S. factory output; demand remains strong
  • Another Fed minion caught trading while central banking:
  • Bigger trouble developing in China:
  • China faces challenges from ‘mismanagement’ at certain firms, says PBOC head
  • Bigger inflation developing all over:
  • S&P, Nasdaq enjoy boost from big tech firms, Dow ends a hair lower
  • Tuesday, 19 October 2021
    • Signs and portents for the U.S. economy:
  • Fed minions becoming concerned about inflation:
  • Bigger trouble developing in China is home made in China:
  • ECB minions see no reason to hike interest rates soon, are concerned by rising inflation:
  • Wall Street ends higher as investors bet on positive earnings season
  • Wednesday, 20 October 2021
    • Signs and portents for the U.S. economy:
  • Oil rallies as U.S. crude stocks decline in tight market
  • Pandemic fallout could slow U.S. online holiday spending growth: report
  • Fed minion says Fed’s policies are perfect:
  • Bigger trouble developing in China:
  • Bigger inflation developing all over:
  • ECB minions, having solved all problems of jobs and inflation, turn attention to climate change:
  • Wall Street closes higher as earnings reports soothe investor fears
  • Thursday, 21 October 2021
    • Signs and portents for the U.S. economy:
  • Fed minions want to stop holding so many U.S. Treasuries, get new rules to minimize potential for insider trading:
  • Bigger inflation developing all over:
  • BOJ minions want to stop doing so much stimulus, says Japan’s banks are stable:
  • IBM weighs on the Dow; Nasdaq and S&P gain ground
  • Friday, 22 October 2021
    • Signs and portents for the U.S. economy:
  • Chief Fed minion says its time to taper stimulus bond buys while facing forced stock sale, another minion says Fed should keep stimulus going:
  • Fed’s Daly: standing pat is right course for monetary policy now
  • Bigger inflation developing all over:
  • Mixed economic picture emerging in Asia:
  • ECB minions want to be last in line to hike interest rates, may get new ethics rules like Fed:
  • ECB urged to tighten trading rules for policymakers
  • Nasdaq, S&P 500 end lower, dragged down by communications services
  • If you haven’t already guessed it by clicking through the headlines, Reuters is a terrific resource for business and markets news, with a higher-than-average signal to noise ratio for picking up on market-moving news items.


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