On Aug. 12, JPMorgan's trading desk released its latest scenario analysis for tonight's CPI report. The bank laid out three cases for core inflation and their expected impact on the S&P 500. If core CPI prints between 0.15% and 0.20%, JPMorgan expects the S&P 500 to gain roughly 0.5% to 1%. In the base case of 0.20%–0.25%, the index is still projected to rise about 0.25% to 0.75%. The risk emerges if core CPI lands in the 0.25%–0.30% range — there, JPMorgan sees the S&P 500 falling approximately 0.5% to 1.25%. Put simply, as long as core CPI stays at or below 0.25%, the market can breathe.
JPMorgan's trading desk published its scenario analysis for tonight's CPI report on Aug. 12. The takeaway is simple: as long as core CPI does not exceed 0.25%, the S&P 500 can hold up.
In the first scenario, core CPI comes in between 0.15% and 0.20%. JPMorgan sees the index gaining around 0.5% to 1%. In the base-case range of 0.20%–0.25%, the S&P 500 is still expected to rise about 0.25% to 0.75%.
The trouble starts if core CPI lands between 0.25% and 0.30%. According to JPMorgan, the S&P 500 could then fall roughly 0.5% to 1.25%. In short, 0.25% is the line that separates comfort from caution.
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