(Bloomberg) – The American action rally is already on fragile ground due to prices and an uncertain perspective on artificial intelligence. Add a hot inflation print to the mixture and the market will sell.
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It is according to the trading desk of JPMorgan Chase & Co. Market Intelligence, which estimates that the S&P 500 will drop to 2% in the event that consumer prices increased by 0.4% or more in January compared one month before.
“Expect that the bond market reacts violently as it changes its point of view so that the federating funds are not restrictive and the next most likely action of the Fed is a hike rather than a cut”, wrote the team led by Andrew Tyler in a note. “The move in bond yields would lead to the increase in the USD, putting pressure on the shares.”
Many things about the figures due at 8:30 a.m. New York time. Friday, the market reacted excessively to data on consumer feeling and the expectations of inflation of the University of Michigan, said Tyler. “It put an over-skill about the impression of the ICC,” they added.
The strategists are tactically optimistic about American actions, expecting higher economic growth to the tendency in the United States, positive income and a neutral federal reserve with a dominant inclination. A slightly warmer print would refute this perspective, they said, even if the most likely result is that the monthly inflation figure is between the range from 0.27% to 0.33%.
The consensus estimate concerns an increase of 0.3% of the IPC per month, while the implicit options for the S&P 500 index are just below 1%. Last month, the data launched an excessive increase movement for the stock market, and it is likely that very small gap compared to forecasts will again lead to volatility.
After a solid two -year rally for the S&P 500, investors are now struggling with the threat of Donald Trump tariffs potentially sweeping higher inflation, high persistent interest rates and high assessments of large technologies that are More and more questioned. The president of the Fed, Jerome Powell, said that the central bank did not need to rush to adjust interest rates on Tuesday, sending higher bond yields. Exchange the markets currently at a price in a single drop in rate this year.
Dominic Wilson by Goldman Sachs Group Inc. said their forecasts for inflation printing are slightly higher than the consensus.
“If we print consensus, there could be a slight relief,” wrote Wilson, a main market advisor, in a note. “We believe that the underlying inflation pressures that ex-tariffs are likely to prove more benign than the market awaits it, but the prices are likely to compensate for this in the short term and we have increased our recently inflation forecasts. The markets have already evaluated part of this risk. »»
