The 11/10 CPI Report Likely Won't Do Much: MoM Change in CPI < 0.6 Should Leave Markets Fine
As long as monthly CPI doesn’t come in ridiculous, like greater than 276.00 (MoM change of about 0.62, or YoY change of 6%), then we shouldn’t get a major selloff.
CPI: The Fed Uses This Number To Make Money-injection Decisions
Market Impact of November 11th’s CPI Report: Don’t Worry
Check the Bureau of Labor Statistics Website Wednesday morning at 8:30am for October CPI data.
This CPI report probably won’t mean too much unless inflation is suddenly out of control, like a MoM change of >0.6 or something. The market seems to have “priced” this in before, at least according to a variety of analysts and media outlets.
What Might Happen Wednesday? Not as much as before.
October CPI data is going to be published on the Bureau of Labor Statistics Website Wednesday morning at 8:30am. We don’t expect anything extreme.
This will shake up the market, but not as much as the last CPI report. The market is GENERALLY sensitive to MONTHLY CHANGES in inflation, unemployment and other economic indicators — CPI is a key inflation indicator that will move the market. The market is probably looking for an October CPI of less than 275.05, which would indicate a slowing monthly change percentage, and a higher likelihood that the Fed won’t suddenly change their QE policy of injecting money into banks.
What is CPI?
CPI is a number that represents the change in prices of some “basket of goods” that’s supposed to represent the prices of things in an economy. CPI is the Consumer Price Index — it’s easiest to think of it as a measure change in prices. Below is previous Month’s CPI data taken from economy.com. What we don’t want to see is that line continue upward with the same slope.
The Fed reports on CPI-U, which is CPI but for the “Urban Consumer”, or a price index representing goods and services that people in an urban or urban metro-area would consume.
What Might Happen in The Market?
1. As long as monthly CPI doesn’t come in greater than 276.00 (MoM change of about 0.62, or YoY change of 6%), then we shouldn’t get a major selloff.
The worst that might happen is a brief selloff, then a bounce back to the upside.
Right now the market is ridiculously resilient to anything. As we just saw with Tesla, there was a 5% selloff in the pre-market time window the day after Elon Musk gave hints at selling 10% of his TSLA holdings. It bounced
Why It Matters To Stocks and the Economy
Stocks
Right now we’re at a euphoric time, so as long as we don’t get anything too bad, stocks will, at most, selloff a little then bounce right back.
A few weeks ago, the Fed already announced their intent to begin tapering soon. CPI is a measure of inflation which investors have been hyper sensitive to for the past 10 months or so. Less QE would mean less money for banks to lend to investors (i.e. less money in the stock market). The market seems to have already priced this in (i.e. sold a bunch) so we’re not as concerned about it as before.
Economy
Luckily, the job market looks a lot better than before and stagflation doesn’t seem to be as much of a fear as before.
At this point, economic data like unemployment reports don’t meant too much.
The Fed has been doing a better-than-usual job to instill confidence in the market and businesses by staying consistent with their messaging on QE.