As promised, we're taking our first look forward for the S&P 500 (Index: SPX) through the end of 2020-Q1. The following chart shows what the dividend futures-based model we use to project the future for the S&P 500 says that future may look like during the next few months, depending upon which future quarter investors fix their focus upon:
Through the end of 10 January 2019, the level of the S&P 500 is consistent with investors focusing on the current quarter of 2020-Q1 in setting current day stock prices, but we suspect that may be about to change, where we think the most likely outcome will be that investors will shift their focus toward the distant future quarter of 2020-Q4.
The reason why we're thinking that is because Fed officials invested a lot of effort during the past week to try to convince investors that they would not be changing interest rates in 2020.
But according to the CME Group's FedWatch tool, they didn't succeed. The following snapshot from after the close of trading on Friday, 10 January 2020 shows that investors are betting the Fed will cut the Federal Funds Rate by a quarter point in 2020-Q4, which provides a strong incentive for investors to focus on this point of time in the future.
Given what we've observed in how stock prices work, we would see that shift take place with stock prices mostly moving sideways. If we're wrong, and investors continue to focus on 2020-Q1 in setting current day stock prices, we'll see the S&P 500 rise sharply instead.
There are certainly worse ways to be wrong! In any case, if you want to get a better idea of how we do what we do, others have done a good job of explaining the logic behind what it takes to follow the quantum random walk of stock prices!