The US August CPI data just came out and it was a beat to the upside which is a bad news for inflation. The expected core CPI m/m was 0.3%, but it came in at 0.6%. The market reacted terribly to this. Major indexes were down 1-3%.
I made a video for this topic, pls help like it :)
https://youtu.be/EG_HEIKw5iQ
The 0.3% beat in the market does not sound that bad at first sight. But do remember that :
Firstly, this months CPI data was actually already suppressed by US using their oil reserve which was created to aid US in the event of a major war happening or events of similar magnitude. Since the creation of this oil reserve, it has not been used once at the scale we are seeing today even during wars that US directly participated in. This means that the politicians probably knows how bad the current situation is and is trying everything to slow down inflation. But according to many speculations, it is presumed that this oil reserve will deplete sometime after mid term (8/11). This means that in the future's CPI data, oil prices will cause CPI data to probably increase more, hence the fear in the market.
Secondly, the market was very 'euphoric' and bullish the days leading up to today. The SP500 rose by 5% from 6/9-12/9. This rally was fueled by a bullish market + not as good as expected data which includes consumer spending & earnings, and employment data which lead the market to believe that this month's CPI data was going to be favourable for the FED. But it turned out otherwise.
Comments