According to JP Morgan, if the consumer price index (CPI) rises above 8.3%, investors should expect a stock market decline around 5% - CPI report for September.
The bank JP Morgan, expects the stock market to sell-off by 5% if the inflation gauge shows a re-acceleration relative to August's 8.3% reading, as it would bolster the Fed's call that it needs to continue to hike interest rates to tame inflation.
While the Fed is widely expected to hike interest rate by another 75 basis points at its upcoming FOMC meeting on November 2, its following two meetings lack consensus and this Thursday's CPI inflation could determine whether the Fed continues with its aggressive rate hikes after November 2, or if a slow-down in rate hikes is appropriate.
Conversely, any CPI readings below 8.1% could spark some big gains for the stock market. Specifically, a CPI print below 7.9% would likely generate a 2%-3% rally on Thursday, "though if we see CPI gap down more than 60 basis points the move could be larger,