JPMorgan, Goldman Predict Huge Market Surge, Plunge Depending On CPI Print

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by Tyler Durden
Wednesday, Oct 12, 2022 - 11:44 PM

With stocks collapsing after last week's jobs report, which while mostly inline surprised with the unexpectedly large drop in the unemployment rate (a number which is laughably fabricated and straight from the US propaganda bureau as it comes as ever more companies announce mass layoffs), the stakes ahead of Thursday's CPI print are even higher according to the two most important US trading desks, that of JPMorgan and Goldman Sachs.

Starting with the former, JPM market intelligence trader Andrew Tyler writes that while a 75bps rate hike in three weeks "feels like a foregone conclusion but the following 2 meetings lack a consensus" and said consensus will be formed depending on what the CPI print is. As a reference, JPM chief economist Mike Feroli expects that CPI for Headline YoY will come at 8.1% (0.3% MoM) and for Core YoY is 6.5% (0.45% MoM), both in line with expectations on an annual basis if slightly hotter than consensus sequentially (more below). How does this translate into market moves? Well, according to Tyler the answer is as follows:

  •  CPI prints above 8.3% ->  this will be another -5% day. The Sep 13 CPI print, when the whisper number was a miss but got a beat instead (8.3% vs. 8.1% consensus; 8.5% prior) triggered a 4.3% decline in the SPX as Credit outperformed.
  • CPI prints 8.1% - 8.3% -> also a negative outcome, with SPX -1.5% - 2%, potentially characterized by a buyers strike. The bigger concern here, according to JPM, is the bond market repricing to increase the probability of a 75bps hike in December.
  • CPI prints 7.9% - 8.0% -> this is likely enough to stage a rally, perhaps +75bps – 100bps. Currently, Bloomberg's mash up of economic forecasts show 2022 Q4 averaging 7.2%, meaning that if we see an 8.0% print this week, then the next two prints need to average 6.9%.
  • CPI prints below 7.9% -> should this come to fruition, JPM thinks a +2-3% day is most likely, though if we see CPI gap down more than 60bps (largest is the move from 9.1% to 8.5%) the move could be larger; then calls for a Fed pause/pivot may become deafening.