Here’s How Stocks Are Likely To React To The US Inflation Data

Here’s How Stocks Are Likely To React To The US Inflation Data
Jonathan Hobbs, CFA

over 1 year ago2 mins

Mentioned in story

The Federal Reserve (the Fed) is in the midst of its most aggressive rate hiking cycle ever, in a bid to cool the US’s overly hot inflation. So it’s no wonder investors are so keenly focused on the key US consumer price index (CPI) report, due out Thursday at 8:30am (Eastern time) – an hour before the US stock market opens. The data, which is closely watched by the Fed, is likely to move markets in a big way. Here’s how Goldman Sachs’s trading desk sees it all playing out…

The investment bank expects the CPI number (measured from September 2021 to September 2022) to come in at 8.1%, a little softer than the 8.3% yearly pace we saw in August. That’s on par with what the general market expects those numbers to be, but the bigger question for investors is: what happens to US stock prices if the actual inflation number turns out to be lower – or higher?

Goldman thinks bad news is bad news in this case: meaning, if the yearly inflation number is above 8.2%, the S&P 500 index is likely to plunge 3% – or more – during the trading day. If it’s closer to expectations – anywhere from 8% to 8.2% – the index is likely to fall just 1% to 2%. If the inflation news is good – and lower than expected – it would have the opposite effect for stocks: a number between 7.8% and 7.9% could lead to a 1% to 2% gain, and a result below 7.8% would likely see stocks jump over 3% higher, according to Goldman. But regardless of what the data actually says, with a report this hotly anticipated, there’s bound to be volatility in the market. So my suggestion is this: don’t try to day-trade the news to make a quick buck, and stick to your long-term plan instead.



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