Last week, the stock market gave 52% odds that the Fed would commit to tapering off its purchases of U.S. government-issued securities by the end of the third quarter of 2013. In just a week's time, the probability of that happening have increased to be somewhere between 62% and 78%.
We know that's the case because that's how much the gap between the expectations for dividends associated with the first quarter of 2014, the point in the future where investors had fully fixed their forward-looking focus as recently as mid-June 2013, and the expectations associated with the third quarter of 2013, which is where investors expecting an earlier end to the Fed's QE program would focus, has closed.
The reason we're now indicating a range of potential odds for this likelihood is due to the different information being communicated by our primary sources of data for the dividends that will be paid out in future quarters.
One of those sources effectively stopped transmitting data related to the full amount of dividends that would be paid out during 2013-Q3 after the futures contracts for the dividends of 2013-Q2 were closed out, which happened back on the third Friday of June 2013. At that time, those futures indicated that S&P 500 companies would collectively pay the equivalent of $8.64 per share in cash dividends during the third quarter of 2013.
Our other source of data continued transmitting however, and now indicates that the effective cash dividend per share that will be paid out by S&P 500 companies will be $8.81.
The difference between these two values accounts for the range of probabilities associated with our real-life Schrödinger's Cat experiment with the stock market, which we've indicated by the range on our chart (the upper limit of the range coincides with 2013-Q3 dividends at $8.81 per share, the lower limit coincides with the $8.64 per share value.)
Political Calculations is a site that develops, applies and presents both established and cutting edge theory to the topics of investing, business and economics.
Be the first to read Political Calculation's column. Sign up today and receive Townhall.com delivered each morning to your inbox.
Open Letter to Obama and Congress From Internet Giants Calls For Reining In Government Surveillance | Nick Sorrentino
(An important interview) Saving the Net from the surveillance state (And Crony Media): Glenn Greenwald speaks up (Q&A) | Nick Sorrentino