The release of the June consumer price index report is expected to be a significant market event this week. Economists are predicting a 0.1% rise in CPI month over month and a 3.1% increase year over year. The core CPI, which excludes food and energy prices, is forecasted to have grown 0.2% month over month and 3.4% year over year.
Market Volatility
The report is anticipated to impact the stock market, especially with equities currently at record highs. Traders at JPMorgan have outlined six potential scenarios and how they expect the S&P 500 to react to each one.
Possible Scenarios
– **35% Chance:** If CPI rises 0.15% to 0.2% month over month, the S&P 500 could increase by 0.5% to 1%. This may lead to calls for a September interest rate cut by the Federal Reserve.
– **30% Chance:** In the event of a 0.2% to 0.25% increase in CPI, the S&P 500 may see a 0.25% to 0.75% rise. Decimal points in the figures could impact the initial market reaction.
– **15% Chance:** A 0.25% to -0.3% rise in CPI could result in a 0.75% to 1.25% drop in the S&P 500. This scenario is concerning as it could indicate an increase in shelter prices.
– **15% Chance:** A 0.1% to 0.15% increase in CPI could be viewed positively by investors, suggesting potential goods disinflation acceleration. This could lead to a 1% to 1.5% jump in the S&P 500.
– **2.5% Chance:** If CPI rises more than 0.3%, there might be a 1.25% to 2.5% sell-off in the S&P 500. This would be considered a tail-risk scenario with potential recessionary or stagflationary implications.
The June consumer price index report release is eagerly awaited by market participants as it could provide insights into the Federal Reserve’s future interest rate decisions. The various scenarios outlined by JPMorgan traders offer a glimpse into how the S&P 500 might react to different CPI outcomes. Investors will closely monitor the report to gauge its impact on market volatility and potential shifts in economic narratives.