Weak Us Cpi Is Bad For Stocks Rbc

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Weak Us Cpi Is Bad For Stocks Rbc

Weak Us Cpi Is A Bad Sign For Stocks - Rbc

According to analysts from RBC Capital, the weakness seen in the recent reading of US CPI is a bad sign for US stocks.

According to the bank, the reporting season of 2Q24 will be a major test for the markets. They also cited how the famous 'rotational trade' has also started to gain momentum from last week.

For now, the optimism is at an all-time high regarding the Federal Reserve rate cuts. Despite this, RBC believes that the S&P 500 might go through a potential pullback.

Positive Correlation Between Cpi &Amp;Amp; Stocks

They believe that the positioning, as well as the recent sentiment, shows that the pullback might happen despite the higher chances of Fed rate cuts.

They commented on how the weaker CPI from June is a sign that pricing power and revenue have also weakened in the last quarter. So, that's a factor that could weigh heavily on the US stocks and lower the US indices.

Bank added that the CPI and the revenue from the S&P 500 have a positive correlation. So, if the CPI goes down, we can expect a similar trend in the S&P 500 as well.

As for the rotation trade, the RBC added the positioning and valuation, showing a move from large and mega-cap stocks to more small-cap stocks. However, they believe that this might not be true, given the concerns about the GDP and consumer resilience.

Overall, RBC analysts believe that not everything is good for the S&P 500 despite the Fed rate cut optimism and the weaker CPI print. On the one hand, these metrics might provide a boost to certain sectors, but their implications for the overall stock market are a lot more complex.

The general sentiment is that weaker CPI prints will lead us closer to the rate cuts, which are good for the stock market. However, RBC analysts have a different view which is at a 180 degree from most of the market players.

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