CPI update- JPMorgan team offers 4 scenarios of SPX. moves
The January CPI is expected to show a 6.2% year-over-year increase, according to economists polled by Dow Jones.
JPMorgan’s sales and trading desk expects $S&P 500(.SPX)$ to add between 1.5% and 2% in Tuesday’s session before seeing the rally fade. The desk is in alignment with the Dow Jones polled economists, most likely expecting CPI to show an increase of 6% and 6.3% in January from the same month a year prior.
Here’s the desk’s full estimates for how the market could move in response to varying readings, with the likelihood that each case is correct:
- 5% probability — CPI above 6.5% — “This bearish outcome would align with the resurgent inflation hypothesis” —S&P 500 down 2.5% to 3%
- 25% probability — CPI between 6.4% and 6.5% — “The hawkish outcome here would not be as negative as if this occurred last year” — S&P 500 down 1.5%
- 65% probability — CPI between 6.0% and 6.3% — “This bullish outcome would likely pull yields lower, along with the USD, and boost risk assets” —S&P 500 up 1.5% to 2% before fading
- 5% probability — CPI below 6% — “Likely re-prices expectations for the Fed to complete two more rate hikes to just one more rate hike” —S&P 500 up between 2.5% and 3%
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