S&P 500 Investors Splitting Their Focus Between 2019-Q1 and 2019Q3

The S&P 500 (Index: SPX) ended the third week of October 2018 much the same way as it ended the previous week, with investors appearing to split their forward-looking focus between the future quarters of 2019-Q1 and 2019-Q3.

In between, the U.S. stock market continued to show signs of heightened volatility, with fourth quarter earnings pulling investors attention in one direction (upward), and concerns over the frequency and timing of future interest rate hikes by the Fed pulling it in the other (downward).

By the end of the week, investors appeared to be putting a stronger weight on the what U.S. interest rates will be a year from now (60%) than they were upon earnings to come in the nearer term (40%), as visualized by the relative spacing between the actual trajectory of the S&P 500 against the potential trajectories assocated with either 2019-Q1 or 2019-Q3 indicated in our spaghetti forecast chart.

At least, that’s what we were able to glean from the market moving news headlines from the week, which provide the context of what influenced investors to go along with what our dividend futures-based model projected during Week 3 of October 2018.

Monday, 15 October 2018

• Tech stocks drag down Wall St. as earnings worries weigh

Tuesday, 16 October 2018

• Oil up; Iran, Saudi supply worries offset U.S. supply growth
• U.S. regains crown as most competitive economy for first time since 2008: WEF
• Trump widens Fed critique, calls it ‘my biggest threat’
• Wall St. rallies over 2 percent with earnings, data boost

• Big U.S. banks end third quarter on high note

Wednesday, 17 October 2018

• Oil falls below $80 on rising U.S. stockpiles
• Despite Trump criticism, Fed sees need for more rate hikes
• Wall St. falls as investors eye a united hawkish Fed

Thursday, 18 October 2018

• Oil falls on concerns over escalating trade row
• Fed plans would put rates ‘quite a way’ into restrictive area: Bullard

• Fed’s Quarles eyes more dovish rate path, U.S. productivity boost

Wall St. slides as Saudi Arabia, Italy add to economic concerns

Friday, 19 October 2018

• Oil up but posts weekly loss on stock build, trade tensions
• Fed’s Kaplan sees two-three more rate hikes to hit ‘neutral’ level
• U.S. existing home sales fall for sixth straight month
• S&P falls on interest rate, trade concerns; P&G lifts Dow

Meanwhile, Barry Ritholtz outlined the week’s markets and economics news’ positives and negatives. There are seven of each, with an disconcerting new entry at the top of the negative column….