Get Ready For The CPI Data and Best Risk/Reward Opportunity
A deep dive into why this data release could make or break your portfolio this month.
The current times are arguably some of the most volatile in the history of finance. In just a few years, we have witnessed:
One of the worst pandemics in recorded history
The largest injection of liquidity ever seen
The fastest increase in interest rates in history
Inflation not seen in 50 years
The threat of a third world war
The bankruptcy of two major banks in just one week
The fastest drop in money in history FTX.
Looking back at all of this, some see risk, but a few of us see opportunities.
I firmly believe that we are currently presented with a unique opportunity in history, and we must seize it.
As we speak, the annual CPI data is being announced, and although we do not know what it holds, we believe it will be a game changer.
This is because the CPI is the true king of data in inflationary cycles and has been showing a lot of heat since last month, when it surprised us with the largest month-on-month increase (+0.83%) since June 2022.
As I explained back in February, even though the data is bad and worse than expected, it still falls within the range of month-on-month variations seen in previous deflationary cycles.
However, I believe that anyone can agree that one month does not make a trend, but without a doubt, the data that will be released on the 14th will move mountains.
If we see another high month-on-month reading (as indicated in the previous chart), the market could collapse in the short term. Conversely, if the inflation data is contained, the markets will celebrate it with strong gains.
Of course, there are other macro data to observe, as well as statements and decisions to be made by the Federal Reserve. But at the end of the month, whether the stock market closes positively or negatively will depend mainly on these three macroeconomic data points, as they will determine the state of growth and inflation.
I hope this guide on how to interpret or observe these data points will help you draw your own conclusions.
Halt to interest rate hikes
Undoubtedly, the only data point that could trigger a market rally again would be a halt to interest rate hikes. Goldman Sachs has already stated that a continued interest rate hike could harm the system.