This week, the New York stock market has entered a phase of seeking direction ahead of the U.S. inflation indicators release. This is because the inflation trend has emerged as a key factor determining not only the September benchmark interest rate cut but also the monetary policy stance until the end of the year.
Currently, the market sees a high possibility that the Federal Reserve (Fed) will cut the benchmark interest rate by 0.25 percentage points (25bp) at the September Federal Open Market Committee (FOMC) meeting. According to the CME FedWatch, this probability reaches 88.9%, and last week it even exceeded 90%. However, the market's outlook is finely divided, with a 46.7% chance of a total 0.75 percentage point cut and a 42.3% chance of a 0.5 percentage point cut by December.
At the center of this are the July Consumer Price Index (CPI) and Producer Price Index (PPI). On Wall Street, the analysis that signs of price increases due to tariff hikes were confirmed in the June CPI is prevalent. In this context, the July CPI and PPI to be released on the 12th and 14th are expected to provide crucial clues to the Fed's future decisions. Particularly, if strong price pressures are shown in the July CPI, it could slow down the rate cut pace. According to FactSet, the July core CPI is expected to rise 3.0% year-on-year, slightly higher than June's 2.9%.
The Jackson Hole conference is also a variable. The Fed will hold its annual symposium to discuss major monetary policy directions in Jackson Hole, Wyoming, from August 21 to 23. As this meeting is held before the September FOMC, Fed Chair Jerome Powell's remarks are likely to shape market expectations for future interest rate paths. If the Fed reaffirms its priority on price stability at this meeting, the market may shift its focus more towards speed adjustment rather than additional cuts within the year.
Meanwhile, concerns about market adjustments are growing as profit-taking and overvaluation burdens accumulate. The S&P 500 and Nasdaq Composite indices have been setting new all-time highs until recently, causing investors to prepare for a potential pullback. Experts point out that the current price-to-earnings ratio (PER) is around 22 times, which may limit future upside potential. Additionally, seasonal factors are cited as a variable, as August typically tends to show weakness in market trends, raising cautionary investor sentiment.
Geopolitical risks cannot be ignored. On the 15th, President Joe Biden and Russian President Vladimir Putin are planning to meet in Alaska. The agenda is to discuss a ceasefire between Ukraine and Russia. Currently, Ukraine is being asked to return the Russian-occupied eastern Donbas region and Crimean Peninsula, and Ukrainian President Volodymyr Zelenskyy has firmly stated that there will be no territorial concessions. However, if former President Trump leads an agreement with Putin, it could apply pressure on Ukraine, and the market is closely watching the related uncertainties.
These trends could significantly impact the Fed's future interest rate policy and global stock market direction. If inflation slows down faster than expected and diplomatic risks are mitigated, the stock market could regain upward momentum. Conversely, if price pressures persist or geopolitical tensions escalate, investment sentiment could shrink, and the adjustment phase could be prolonged. The market is expected to make a comprehensive judgment this week, considering real economic indicators and the Jackson Hole conference.
Real-time news...Go to Token Post Telegram
<Copyright โ TokenPost, Unauthorized Reproduction and Redistribution Prohibited>
