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The labor market just made the Fed’s job harder. 👀
August NFP came in stronger than expected at 162K, while unemployment held at 4.1%.
That tells me the economy isn’t showing enough weakness to force the Fed’s hand toward easier policy.
But now inflation takes center stage.
August PPI came in hot at 0.4% MoM and 5.4% YoY, while rising energy prices could add even more pressure.
So I’m leaning slightly risk-off heading into CPI.
A hotter CPI — especially a sticky core print — could push rate expectations higher, lift Treasury yields and strengthen the dollar. That’s not exactly the setup stocks and gold want.
But here’s where it gets interesting.
If CPI comes in cooler than expected, the entire narrative could reverse almost instantly.
Markets don’t trade the number alone.
They trade the surprise.
Hotter than expected = potentially bearish.
Cooler than expected = potentially bullish.
For now, I’m not picking a side.
I’m watching the gap between CPI and expectations.
August added 162,000 jobs — while the average over the previous 12 months was only around 31,000. That’s a significant difference.
The key question now is how today’s CPI will move the markets.
If CPI comes in lower, rate-hike fears ease and stocks could rise. Technology and growth stocks would likely benefit the most.
If CPI comes in hotter, rate-hike odds increase and stocks especially growth names could face pressure.
Gold usually moves inversely. A hotter CPI tends to strengthen the dollar and weigh on gold. A cooler CPI can weaken the dollar and support gold.
Jobs are strong, but inflation has been showing gradual signs of cooling. These two signals are making the Fed’s decision more complicated. Today’s CPI will play an important role in clarifying the picture.
What will be your first reaction after today’s CPI release?
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