Fundstrat says upcoming inflation report could trigger the next big sell-off in stocks

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  • Fundstrat said the next big catalyst for stocks is the February CPI inflation report.

  • The report will be released on March 12 and will signal to investors whether the Federal Reserve may soon cut interest rates.

  • “We wonder if this could be the underlying catalyst for the sell-off,” Fundstrat said.

The next big catalyst that could shake up stocks is February’s CPI report, according to a recent report from Fundstrat.

Inflation data due out on March 12 will signal to investors whether the Federal Reserve may cut interest rates soon.

Fundstrat’s Tom Lee said: “For us, this is also the deciding point for markets in 2024. If CPI is ‘hot’ in February, we think markets could become anxious even for statistically wrong reasons .”

February inflation report will be released later January CPI report was hotter than expected, Lee stressed that some of the seasonal factors that led to higher prices in January may spill over into February.

Lee quoted economist Jens Nordvig as saying that companies often raise prices in January, with some of those price increases occurring the following month after the January CPI survey period ends. This means that price increases that occurred in late January will not be apparent until late January. February CPI report.

“Historically, a ‘hot’ CPI in January tends to be followed by a ‘hot’ CPI in February. That is, the residual seasonality that drives increases in January tends to spill over into February,” Li said.

Ultimately, if the February CPI report is indeed higher than expected, it could put the Fed in trouble and lead to more hawkish action from the central bank, as two consecutive hot CPI reports will raise investor questions.How many times are they likely to cut interest rates this year? If they do.

That’s why the hot February CPI report could trigger the worst sell-off in stocks since their record rally in late October.

“It seems that the Fed cannot ignore the optics of two consumer price indexes that appear to be breaking the downward trend. Therefore, it seems likely that the stock market will face selling pressure after this,” Lee said.

“While this is only a short-term rise that could reverse in March/April, given the sharp rise in stocks since October 2023, we wonder if this could be the underlying catalyst for the sell-off,” Lee said.

Li You Suggesting the S&P 500 could suffer a 7% selloff in early 2024, That would drop the index to 4,777, just shy of the stock market’s previous all-time high.

Read the original article business insider

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