JM Morgan trader Taylor wrote that although the rate hike 75 basis points in three weeks looks like a foregone conclusion, the next two meetings will still be controversial about the rate hike target.
He said that the controversy lies in the results of the subsequent CPI data release. For reference, MIKE, chief economist at JP Morgan , predicts that the overall CPI will reach 8.1% year-on-year (0.3% month-on-month) and the core CPI will reach 6.5% (0.45% year-on-year). Both forecast data meet annual expectations. How does this data affect the market trend? Taylor listed three potential data results and their impacts for us:
1, CPI 8.3%, and it is expected that the market will fluctuate within the day by -5% of the market. After the release of the CPI data on September 13 at 8.3% (the previous value was 8.5%), it was higher than the consensus estimate of 8.1%. There is also the reason why the credit data exceeded expectations, which caused the S&P 500 to fall 4.3%.
2 and CPI between 8.1% and 8.3%, which will also trigger a decline. The S&P 500 has a decline space between -1.5% and 2%. The potential reason is the related impact of weak buyer demand. JP Morgan speculates that the bigger reason is that the bond market may reprice due to the increase in the probability of a 75 basis point rate hike in December.
3 and CPI are between 7.9% and 8.0%, which will become a major incentive to promote market rebound. Currently, economists at Bloomberg predict that the CPI growth rate in the fourth quarter of 2022 will be 7.2%, which means that if we see that the CPI data released this week is 8.0%, then on average, the next two CPI data released will be 6.9%.
4, CPI data is less than 7.9%. JP Morgan believes that if the data becomes a fact in this range, then S&P is likely to have a daily increase of , but if we see the gap in CPI data drop by more than 60 basis points (the maximum may be falling from 9.1% to 8.5%), then this will have a huge impact on the market. The market's expectations and pricing of the Federal Reserve's interest rate hike will rise unprecedentedly.
