Anticipating market reactions to the coming CPI report

The upcoming release of the Consumer Price Index (CPI) data on Wednesday, September 11, 2024, has the attention of market participants across the globe, but will it reveal truth or another economic narrative?

This CPI economic indicator, which measures changes in the prices paid by consumers for a basket of goods and services, is widely watched for its potential implications on Federal Reserve policy and broader financial market trends.

Consensus expectations and potential impacts

The consensus points to a modest increase in the CPI for September, potentially similar to, or slightly lower than, the 0.6% increase seen in August. The focus is on the core CPI, which excludes volatile food and energy prices, as it is said to provide a clearer picture of underlying inflationary pressures.

Almost every statement suggests a positive near term. Look at how optimistic the US Treasury gauges the US economy.

“Today, the global economy remains resilient—driven in large part by the United States’ remarkable economic performance. Instead of faltering, U.S. GDP grew by a robust 3.1 percent during 2023. And new data from just this morning shows growth of 2.8 percent in the second quarter of this year, affirming the path we’re on to steady growth and declining inflation.”

Janet Yellen  - US Secretary of the Treasury (August 25, 2024)

But how grounded is the optimism? If the CPI figure aligns with market forecasts, the response may be relatively muted, as investors have already priced in the anticipated increase. However, a CPI reading exceeding expectations could trigger concerns about persistent inflation, potentially leading to a stock market decline, bond market sell-off, and US dollar appreciation as the Federal Reserve may be compelled to raise rates further.

Conversely, a CPI figure below expectations could suggest easing inflationary pressures, potentially resulting in a stock market rally, bond market rally, and US dollar depreciation as investors anticipate a less aggressive Fed policy.

Additional factors and navigating the report

Beyond the headline CPI number, traders might pay attention to all recent economic indicators like the jobs report, retail sales, and manufacturing data. These are believed to provide context for the CPI release and help gauge the overall health of the economy.

Technical analysis, including identifying potential support and resistance levels in various markets, can help anticipate market reactions. Also, monitor the VIX or "fear index," which provides insights into market expectations for volatility.

Remember that certain sectors may react differently to the CPI data depending on their sensitivity to interest rates and inflation. For example, technology and growth stocks may be more vulnerable to rising rates than defensive sectors like utilities and consumer staples.

Conclusion

As the CPI data release approaches, maintain a critical eye and don't rely solely on the information presented in the news or the government.

• The most recent jobs report was revealed to be over-inflated by over 800,000 jobs.
• The optimistic GDP report was also inflated by adding $60 billion worth of obsolete weapons sent to Ukraine.
• Consumer spending was reported by the Fed to be rising, indicating economic confidence, which in reality is a result of inflationary price hikes, forcing Americans to pay more for everything and turn to credit cards to pay the bills.

These three examples of collaborative misdirection by the Fed and the Treasury mean the next report release could be nothing more than propaganda aimed to maintain positive market sentiment until after the election. And keep in mind how none of the mainstream financial media are mentioning the bulging $35T debt, which requires a servicing cost of  almost $900 billion. That figure is more than the $886 billion Defense spend and Medicaid’s $697 billion… and it’s growing every day.

Knowing all this information can seem daunting, but it also gives traders a massive advantage when forecasting US stocks, gold, Bitcoin, and USD. Q4-2024 is going to be a rollercoaster ride for sure.

This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.

---

Author:

Paul Reid

Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.