After CPI, Thursday brings PPI and retail sales. A hotter-than-expected PPI would reinforce concerns that cost pressures remain persistent; retail sales will test whether consumers can still withstand high interest rates and high oil prices. Looking at both reports together gives a better sense of whether the soft-landing narrative holds up than looking at inflation readings alone.
Third-quarter earnings season is underway, and demand data will feed directly into discussions of company guidance. If retail sales slow sharply while PPI remains high, a “stagflation-style” trade could emerge, putting both growth stocks and consumer discretionary stocks under pressure.
My view: Treat Thursday as a confirmation day for CPI. When positioning, don’t assume the data will perfectly support your view. Decide in advance what you’ll trim on bad data and what you’ll add on good data.
Execution discipline is more important than predicting price levels.
The above content is for reference only and does not constitute investment advice.