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Christopher P. Harvey, the senior equity analyst at Wells Fargo, sees risk assets staging a near-term bounce in the aftermath of the June CPI report that is due tomorrow.
Equities will plunge only in the case of a “well-above-consensus CPI print” that would push the Fed toward an even more aggressive pro-hawkish stance.
“We expect equities to have another near-term pop (risk-on rally) if headline CPI is in-line with, slightly above, or well below the consensus of 1.1% m/m (total) and 0.5% m/m (core),” Harvey told clients in a note.
The Street is calling for an 8.8% y/y surge in inflation – the highest in recent memory, Harvey reminds clients.
“We believe analyst bias and an asymmetric payoff structure is building a consensus that will be difficult to exceed… After May’s CPI miss, and last Friday’s miss on payrolls, we now expect a near-term upward bias to forecasts.”
Growth stocks are most likely to rally in this case given their slump since the beginning of the year.
