On Tuesday this week US CPI data will be released. The headline is expected to fall to 6.2% down from 6.4% prior. Inflation is a major focus for the Federal Reserve right now as it seeks to bring inflation back down to its 2% target.

If inflation data comes in much lower than expected then that will give traders confidence ahead of the Fed’s meeting this week that the Fed may dial back some of the more hawkish expectations. STIR markets have already priced in a terminal rate of around 5.62%, so anything lower than that from the Dot Plot could see some of the recent weakness in stocks unwind.

If you look at the S&P500 there are some strong seasonals ahead with a 5.35% average return. The maximum gain has been an astounding 32%, but that was due to the unique stimulatory environment during the Covid response.

Major Trade Risks: The major trade risk here is if headline inflation comes in over 6.4% which would show inflation heading in the wrong direction for the Fed which would likely send the S&P500 lower on expectations of a more hawkish Fed.

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