2023-05-10 12:01:00
US April Consumer Price Index (CPI) will be released on Wednesday (10th), and the market generally expects CPI to grow by 5%. Two large Wall Street investment banks agreed that the upcoming weak inflation data will prompt the Federal Reserve (Fed) to stop tightening policy, and US stocks will rise accordingly.
Goldman Sachs (Goldman Sachs) partner John Flood said, CPI close to or below the consensus estimate of 5% may trigger a rise in US stocks, when the S & P 500 index rose at least 0.5%. However, if the data turns out to be surprisingly strong, stocks might fall sharply.In addition, if the inflation data is higher than 5.9%, theS&P 500 Indexwill fall by at least 2%. “The colder the data right now, the better for the stock market,” Flood said.
JPMorgan analyst Andrew Tyler agrees.The most likely scenario, according to the bank, is a CPI between 5% and 5.2%, followed byS&P 500 IndexIt will rise between 0.5 percent and 0.75 percent. However, if the inflation rate reaches above 5.5%, US stocks may fall by more than 3%.
Both investment banks also expect U.S. stocks to rise by at least 2.5 percent if inflation falls below 4.5 percent. The last time the CPI was near that level was in April 2021, and JPMorgan now sees a 1% chance of falling there.
The Fed has been aggressively pushing to raise interest rates in a bid to cool the highest inflation in decades. The Fed’s rate hike last week might be the last in the current tightening cycle as inflationary pressures begin to ease. Fed Chairman Jerome Powell said at a press conference last week that despite rising inflation, long-term inflation remains stable, suggesting he believes the public has confidence in the central bank’s ability to bring inflation back to its 2% target.
The New York Fed survey showed that consumers expect inflation to be 4.4% in the next 12 months, down from 4.7% in the March survey, and expectations for three-year inflation rose to 2.9%, up from 2.8% in March, while Five-year inflation expectations rose to 2.6% from 2.5% in March.
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