JPMorgan: "US CPI release could fuel greater equity-market volatility"

JH Kim

Summary

JPMorgan’s trading desk said this week’s CPI reading could drive a short-term surge or selloff in equities.
The report said that if core CPI comes in at 0.35%–0.4%, the S&P 500 could rise 0.25%–0.75%, while a print above 0.45% could push the S&P 500 down 1.25%–2.5%.
JPMorgan assessed that the odds are higher for a hawkish upside inflation surprise, but added that even a stagflation-tinged outcome could elicit only a limited market response.

With the US Consumer Price Index (CPI) release looming, equities could see sharp swings, according to a new outlook.

On the 12th (local time), Walter Bloomberg, an economy-news alert account, cited a recent report from JPMorgan’s trading desk saying that this week’s CPI reading could trigger a short-term surge or selloff in stocks. Market consensus expects January core inflation to rise 0.3% month on month and 2.5% year on year. JPMorgan projected the monthly increase could come in at 0.39%.

The report put the probability of core CPI landing in the 0.35%–0.4% range at 42.5%, a scenario in which the S&P 500 could gain 0.25%–0.75%. By contrast, it estimated a 5% chance of a print above 0.45%, which it said could send the S&P 500 down 1.25%–2.5%.

JPMorgan judged the risk skewed toward a hawkish (tighter-policy) upside inflation surprise. Even if the data carry a stagflationary flavor—slower growth alongside rising prices—it added, the market reaction could be limited.