The CPI trade: What JPMorgan sees the market doing, based on these scenarios

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JPMorgan's sales and trading team highlighted five potential scenarios for how the stock market could react to August's CPI print

Wall Street is closely watching August's consumer price index this week for further insight into the Federal Reserve's hiking cycle as fears mount that the central bank may not be done just yet. For August, CPI is expected to rise 0.6% on a month-over-month basis and 3.6% from a year ago, according to economists polled by Dow Jones.

The biggest risk from this situation would be a Fed that is forced to continue hiking into, or through, the start of a recession. The S & P 500 could lose between 1% and 1.5% under this scenario. 20% chance — Between 0.3% and 0.45%. This result would reflect an increase from the 0.2% uptick in July but should eliminate the likelihood of a September hike and trim expectations for a November increase.

 

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