Investors are Hoping for a Soft Landing for the US Economy
Yes, that is correct. Investors are hoping for a soft landing for the US economy, which means that the Federal Reserve will be able to bring down inflation without causing a recession. The next round of inflation data, which will be released on September 13, will be closely watched by investors. If the data shows that inflation is still rising, it could lead to expectations of more aggressive rate hikes from the Fed, which could weigh on stocks. However, if the data shows that inflation is starting to cool, it could give investors some relief and could help to support the stock market rally.
The Factors that Investors Will be Watching for in the Inflation Data
· The headline inflation rate, which measures the overall change in prices for goods and services.
· The core inflation rate, which rejects food and energy prices.
· The inflation rate for rent, which is a key component of the cost of living.
· The inflation rate for wages, which could give investors an indication of whether workers are starting to demand higher pay to keep up with rising prices.
The Federal Reserve has said that it is loyal to taking inflation back down to its 2% target. However, it is a delicate balancing act, as the Fed does not want to increase interest rates too quickly or too high, which could slow the economy and lead to a recession.
Investors will be watching the inflation data closely in the coming weeks and months to see how the Fed navigates this difficult challenge.
Additional Thoughts from Analysts
· “The market is valuing in a soft landing, but it’s not a sure thing,” said Randy Frederick, managing director of trading & derivatives for the Schwab Center for Financial Research. “If we get a high inflation print, we will see those expectations pick right up” for September and November.
· “The Fed is walking a tightrope,” said Michael Purves, head of Tallbacken Capital Advisors. “They need to bring inflation down, but they don’t want to do it so quickly that they cause a recession.”
· “The next few weeks will be critical for the stock market,” said Art Cashin, chief market strategist at UBS. “The inflation data will be the main focus, but investors will also be watching earnings reports and economic data.”