Thursday’s inflation print is a crucial event for the market this week. Investors are getting ready for the August consumer price index, which will release on Thursday at 8:30 a.m. ET. The report is expected to inform the Federal Reserve policymakers’ decision at their September meeting. Many investors are hoping the central bank will announce its first rate cut since last December — even though the inflation level remains above the Fed’s 2% goal. The Fed has explicitly tied its future interest rate cut decisions to its progress on tackling inflation. For the previous month, the CPI is expected to show a year-over-year rise to 2.9% from 2.7%, according to FactSet consensus estimates. Excluding volatile food and energy prices, CPI is expected to have held steady at 0.3% and 3.1% on a monthly and yearly basis, respectively. The report is considered the most widely used measure of inflation. JPMorgan expects the Fed to move ahead with a 25 basis point cut in September regardless of the outcome of the CPI. A hotter-than-expected outcome could keep central bankers on the sidelines for later meetings this year, especially if GDP growth metrics continue to move higher, however, the firm said. “We do not think there is a credible threat to the print that would force the Fed to remain paused in September. However, we do think a materially hawkish print here adjusts the Fed’s reaction function to October and December meetings,” reads a note from the trading desk at JPMorgan. “Stated plainly, if we see a spike to inflation in this print then it is likely we see inflation acceleration into year-end and into 2026.” The monthly CPI report, as well as other key economic measures, has become all-the-more important to investors given that U.S. equities are trading at record highs. While traders have been raking in wins, several risks remain even as the current bull market “feels unstoppable,” JPMorgan warned. “Inflation, employment, and trade have key risk factors,” the note reads. “Thursday’s CPI print, even with a hawkish surprise, is unlikely to stop the Fed from cutting on the 17th; but, the combination of public and private company comments on inflation reflect that more tariff-induced cost passthrough is coming though the speed and magnitude remain unknown. Further, labor supply is declining, and rate cuts may spur labor demand triggering wage inflation which tends to be sticky.” .SPX YTD mountain S & P 500 year to date The firm added that the upcoming Fed meeting could turn into a “sell the news” given the considerations of macroeconomic data, potentially stretched positioning and lessening participation form retail investors among other factors. JPMorgan said it maintains its “tactically bullish” view on the market, although it has lower conviction given the mounting macroeconomic risks and negative seasonality. Here are the scenarios it has outlined for Thursday, based on varying core, month-over-month CPI scenarios: JPMorgan sees a 5% chance that core monthly CPI is above 0.40%. If this happens, the S & P 500 loses 1.5% to 2%. It sees a 25% chance that core monthly CPI lands between 0.35% and 0.40%. The S & P 500 could then lose between 0.5% and 1% in this scenario. It puts the odds at 35% that core monthly CPI comes in between 0.30% and 0.35%. That might lead the S & P 500 to end the day with a 25 basis point loss to a 50 basis point gain. There’s a 30% chance that core monthly CPI prints between 0.25% and 0.30%. The S & P 500 might post a gain of anywhere between 1% and 1.5% in this case. And it puts just a 5% chance that core month-over-month CPI drops to less than 0.25%. That would likely drive the S & P 500 to jump between 1.25% and 1.75%.
Source: Stocks set to make a big move after CPI hits — How JPMorgan sees it playing out
