JPMorgan Chase (JPM) said that the upcoming US inflation data is expected to be lower than market expectations, which will help the stock market to continue the recent bear market rally.
The report pointed out that the market currently generally expects that the annual growth rate of the consumer price index (CPI) in December will further drop to 6.5%, and the core CPI growth rate will also further drop to 5.7%. JPMorgan analysts such as Andrew Tyler estimate that there is a two-thirds possibility that the actual data will be within 0.1% of the current market consensus expectation, and it is expected to be lower than expected.
Analysts believe that any signs of progress made by the Federal Reserve (Fed) in its fight once morest inflation will help to ease the bearish sentiment in the market. The S&P 500 index of US stocks is expected to rise by 1.5% to 2% on the day of the data release.
Tyler pointed out that cooling inflation will help the bear market rebound, but as long as the Fed maintains a tightening cycle, investors should remain cautious, and Morgan Stanley’s scenario analysis is biased towards bullish stocks.
In addition, the report also pointed out that if the latest inflation rate is lower than 6.4% (Mr. Morgan believes that the probability is 20%), thenS&P 500 IndexWill rise 3% to 3.5%.
The CPI date has become one of the market’s “shakeout days” over the past year as the Fed embarks on its most aggressive tightening in decades to curb soaring inflation. According to data compiled by Bloomberg,S&P 500 IndexOn the release day of the 2022 CPI data, the average volatility reached 1.9%, almost three times the average volatility of the previous five years.
In fact, any stock rally may not last long in the current environment, but investors can take advantage of volatile market conditions to make quick money, Tyler warned.
Specifically, JPMorgan analysts believe that technology stocks are most likely to see a short-term rebound, especially in areas that have been heavily shorted.
Paul Tudor Jones, the founder of the US hedge fund, once said that Fed Chairman Jerome Powell is facing the most challenging economic environment in 40 years, and the task of fighting inflation is as difficult as trying to land on the moon perfectly. But if Powell succeeds in suppressing inflation without hurting the economy, stocks might rise 7 percent to 8 percent this year. However, if inflation worsens, forcing the Fed to continue raising interest rates, it will push up the risk of recession.