Fundstrat suggests that the upcoming inflation report could be the trigger for the next significant sell-off in the stock market. According to them, the February Consumer Price Index (CPI) report, scheduled for release on March 12, holds crucial implications for investors, potentially indicating whether the Federal Reserve might consider cutting interest rates in the near future.
In a recent note, Fundstrat emphasized the importance of the February CPI report as a catalyst for market movement. They highlighted the significance of this report as a decision point for markets in 2024. Tom Lee from Fundstrat expressed concerns that if the February CPI data shows higher inflation, even if due to statistical anomalies, it could unsettle the markets.
The anticipation surrounding the February CPI report stems partly from the unexpectedly high January CPI report. Historically, according to economist Jens Nordvig cited by Lee, January price increases tend to spill over into February due to seasonal factors. This phenomenon could result in a continuation of higher inflation readings.
A higher-than-expected February CPI report could pose a challenge for the Federal Reserve, potentially leading to a more hawkish stance. If inflation remains elevated for two consecutive months, investors might question the Fed’s approach to interest rate cuts in 2024.
Fundstrat warns that if the February CPI report indicates rising inflationary pressures, it could trigger a significant sell-off in the stock market. Lee suggests that such a sell-off could erase around 7% of the S&P 500’s value, bringing it down to approximately 4,777, close to its previous record highs.
In summary, Fundstrat believes that the February CPI report has the potential to influence market sentiment significantly and could mark a turning point for the stock market in 2024.
