Analysts at Goldman Sachs Group Inc. and JPMorgan Chase & Co expect that U.S. stocks will rally if soft inflation data is reported. This would likely lead the Federal Reserve to bring its interest rate hikes to a halt.
John Flood, a partner at Goldman Sachs Group Inc., suggested that a consumer price index around or below consensus estimates of 5% could lead to a rally, including up to a 0.5% rise for the S&P 500.
“The cooler the data, the better for stocks right now,” Flood wrote in a note to investors. “Pain trade for fast money community would be cyclical outperformance on a hot print.”
JPMorgan Chase & Co. appears to agree with this sentiment, as revealed by a team led by Andrew Tyler. According to this team’s analysis, CPI is expected to come out at around 5% to 5.2%, likely adding 0.5% to 0.75% to the S&P 500.
According to both teams, inflation of 4.5 or lower would trigger a stock rally of 2.5%.