Today CPI report could be more than just another economic release.
My focus is on core CPI.
If the core number shows continued progress, the market may interpret that as evidence that underlying inflation is cooling.
That could be constructive for stocks, gold, and crypto.
But if core inflation comes in significantly hotter, I would expect volatility to increase as traders reassess rates Treasury yields, and the dollar.
The important distinction is between temporary inflation and persistent inflation.
Higher energy prices can lift the headline CPI number but that does not automatically mean the entire inflation picture is getting worse.
A cool CPI could support risk sentiment and potentially benefit stock gold and crypto.
A hot core reading could strengthen the dollar lift yields and create pressure on risk assets. My bias is to stay patient until the data confirms the story.
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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