How JPMorgan Predicts the Market Will React to Inflation News

On Wednesday, all eyes are on the Bureau of Labor Statistics' inflation report. JPMorgan has weighed in on how the stock market might respond. The report, due at 8:30 a. m. ET, is expected to show monthly gains of 0. 3% for both headline and core consumer price index (CPI), with annual inflation rates at 2. 9% and 3. 3% respectively. JPMorgan highlights the monthly core CPI number as crucial. They project a base case scenario where core CPI comes in between 0. 17% and 0. 23%, potentially causing a small rally in the S&P 500, ranging from 0. 25% to 1%. If core CPI is even cooler, at 0. 10% to 0. 17%, the S&P 500 could rise by 1% to 1. 5%. This cooler outcome would likely result from a combination of lower home inflation and increased deflationary pressure from core goods.

Conversely, if core CPI is between 0. 23% and 0. 30%, it could lead to a loss of 0. 75% to 1. 25% in the S&P 500. This scenario might occur if the deflationary trend in core goods reverses or there's a loss of disinflation momentum from housing. The upcoming inflation reading could influence the Federal Reserve's interest rate decisions this winter. While the market expects the Fed to keep rates steady at 4. 25% to 4. 50%, Chairman Jerome Powell could hint at future rate moves during his post-meeting press conference.

Actions