Stocks Week Ahead: Key Data Could Test the Fed’s 2% Inflation Narrative

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The CPI is expected to show a 0.3% m/m increase, up from 0.2% last month, while core CPI is also projected to rise by 0.3% m/m.

This may indicate a rising funding cost and that the market is beginning to experience some form of strain. If these pressures persist or worsen, it could trigger a deleveraging event as costs become unsustainably high. Additionally, primary dealer repo activity has surged recently, indicating an increase in equity-backed repo agreements, where equities are used as collateral to raise cash. This could be a sign of growing liquidity strain.

This is further amplified by the fact that, based on metrics such as price-to-book, price-to-earnings, price-to-sales, and dividend yield, this is likely one of the most expensive markets of the modern era.

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