Investors focused on US inflation data this week, with JPMorgan (JPMorgan, JPMorgan) warning that if the consumer price index (CPI) rises above 8.3% in September, the investors should prepare for a large sell-off in the stock market.
JPMorgan expects that if the US CPI accelerates further in September, it will give the Federal Reserve a reason to remain aggressive and make further interest rate hikes to curb inflation. US stocks are likely to come under selling pressure that day, down 5%.
JPMorgan analyst Andrew Tyler said the S&P 500 fell 4.3% after last month’s 8.3% CPI report for August, and September is likely to be similar.
However, Tyler also said that conversely, if the US CPI is below 8.1% in September, it could trigger a sharp rise in the stock market. Specifically, he estimated that if the CPI annual growth rate in September is below 7.9%, it could require a 2% to 3% rebound in the stock market that day. Furthermore, if the CPI falls by more than 0.6 percentage points since August, the increase could be even greater.
The market now expects the annual CPI growth rate to drop to 8.1% in September, down 0.2% from August. However, Fed officials recently revealed that inflation has not improved significantly at the moment and is not expected to cool quickly, will maintain a strong hawkish tone and may need to continue raising interest rates early in the year. next year.
Loretta Mester, chairman of the Federal Reserve Bank of Cleveland, which holds voting rights on the Federal Open Market Committee (FOMC) this year, also said on Tuesday (11) that although the central bank has drastically hiked interest rates this year. year, he has not been able to control the continued surge in inflation, hence the need for further tightening of monetary policy.
