Investors focused on U.S. inflation data this week, with JPMorgan (JPMorgan, JPMorgan) warning that if the consumer price index (CPI) rises above 8.3% in September, investors should prepare for a sharp sell-off in the stock market.
JPMorgan predicts that if the US CPI further accelerates in September, it will give the Federal Reserve a reason to remain hawkish and carry out more interest rate hikes to curb inflation. U.S. stocks are likely to experience selling pressure that day, with a drop of 5%.
JPMorgan analyst Andrew Tyler said the S&P 500 fell 4.3% following last month’s 8.3% CPI report for August, and September is likely to be similar.
However, Tyler also said that, on the contrary, if the US CPI in September is lower than 8.1%, it may trigger a sharp rise in the stock market. Specifically, he estimated that if the annual growth rate of CPI in September is lower than 7.9%, it may prompt a 2% to 3% rebound in the stock market that day. In addition, if the CPI falls by more than 0.6 percentage points from August, the increase may be even greater.
The market now expects the annual rate of CPI growth to fall to 8.1% in September, down 0.2% from August. However, Fed officials recently revealed that inflation has not improved significantly at present, and it is not expected to cool down quickly. It will maintain a strong hawkish tone and may have to continue raising interest rates early next year.
Loretta Mester, president of the Federal Reserve Bank of Cleveland, who holds voting rights on the Federal Open Market Committee (FOMC) this year, also said on Tuesday (11th) that although the central bank has raised interest rates sharply this year, it has not been able to control the continuous Soaring inflation, thus the need for further monetary policy tightening.