Stocks to spin the narrative no matter what

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In my view, it is going to be a quite a task for investors to pick up on any fear from the US CPI report later. The estimate shows that we should get a softer headline reading, although core annual inflation is estimated to remain steady as in May.

If it plays out that way and the details are somewhat similar to last month, it will be easy for investors to keep arguing that the disinflation process is still playing out; albeit very gradually.

If it doesn’t, I reckon investors might react negatively at first but will then brush this aside as just being a bump in the road. That seems to be the go to story that central banks are trying to sell these days. And as long as it fits with the more bullish narrative, I foresee stocks will have no qualms with that.

The only way I can imagine equities facing a significant dent is if the main numbers are much higher than anticipated and the details also reveal a setback to last month’s report. In that sense, it’s a tall order to really get all of that in line.

Otherwise, no matter what the outcome is, I can imagine stocks spinning the narrative to however it pleases.

The S&P 500 is already up a little over 3% in July trading thus far. The move higher also has a strong seasonal backing to it, so that could yet exacerbate any continued bullish sentiment in the week(s) ahead.

There will definitely be some pushing and pulling before the month is over. However, stocks certainly do look poised to challenge the gains in February and May at this stage. It’s all on the shoulders of tech shares now, again and again.

This article was written by Justin Low at www.forexlive.com.

Go to Forexlive

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