Stock market selloff ‘likely’ if upcoming inflation reading disappoints Fed, strategists warn
The stock market could be headed for a selloff if the upcoming reading on inflation disappoints the Federal Reserve, according to strategists.
The warning comes as investors prepare for the release of the latest Consumer Price Index (CPI) report, which is expected to show an increase in inflation. The report is due to be released on Thursday.
If the reading is lower than expected, it could signal that the Fed’s efforts to stimulate the economy are not having the desired effect. This could lead to a selloff in the stock market, as investors fear that the Fed could be forced to take more aggressive action to boost the economy.
“If the CPI report comes in below expectations, it could spark a selloff in the stock market,” said Michael Arone, chief investment strategist at State Street Global Advisors. “The market is already nervous about inflation, and a lower-than-expected reading could be seen as a sign that the Fed’s efforts to stimulate the economy are not working.”
The Fed has been taking steps to stimulate the economy since the start of the pandemic, including cutting interest rates to near zero and launching a massive bond-buying program. However, these efforts have yet to result in a significant increase in inflation.
If the CPI report shows an increase in inflation, it could be seen as a sign that the Fed’s efforts are beginning to work. This could lead to a rally in the stock market, as investors become more optimistic about the economy.
However, if the report shows a lower-than-expected reading, it could be seen as a sign that the Fed’s efforts are not having the desired effect. This could lead to a selloff in the stock market, as investors become concerned that the Fed may need to take more aggressive action to stimulate the economy.
Regardless of the outcome of the CPI report, investors should remain cautious and be prepared for a potential selloff in the stock market.