The lull in the US stock market this week is expected to end after the release of the consumer price index (CPI) report on Wednesday, with Goldman Sachs Group Inc. (NYSE:GS) partner John Flood making a number of recommendations on what investors could soon face, Bloomberg reports.
Specifically, the S&P 500 will drop at least 2% if the annual inflation rate exceeds the previous value of 6%. However, the stock market may grow if the CPI reaches 5.1%, which is a consensus estimate among economists.
“The stock market is expecting softer data, otherwise there will be more confusion and uncertainty in predicting the Fed’s next moves. Another rate hike in May, but then a sharp cut in the fourth quarter? This is how futures are forecast ahead of tomorrow’s data release.”
Treasury bond yields rose on Tuesday, while stock trading remained in a narrow range as traders awaited both inflation and bank earnings reports this week.
The Fed incorrectly assessed inflation as temporary in 2021 and early 2022, and was then forced to accelerate rate hikes to slow the growth of the economy and inflation. Uncertainty about its policy course has made CPI data one of the main sources of increased market volatility.