US Inflation Data To Test Stock Market Rally Amid Pullback Risks
Reuters reported that strategists at Deutsche Bank and Morgan Stanley warn that stocks may be due for a pullback after a four-month surge that has lifted the S&P 500 by 28% since April, driving valuations to over 22 times forward earnings, well above the long-term average of 15.8.
The rally has persisted despite mounting risks from new tariffs and a historically weak seasonal period, with August and September averaging negative returns over the past 35 years.
The July Consumer Price Index report on Aug 12, expected to show a 2.8% annual rise, could spark volatility. A stronger-than-expected reading may temper expectations for imminent Federal Reserve (Fed) rate cuts, which markets currently see as highly likely following weak jobs data.
The tariff backdrop adds another layer of uncertainty. The US has just enacted its steepest average import duties in a century, with new levies targeting semiconductor chips and pharmaceuticals. China could face further tariff hikes on Aug 12 unless President Donald Trump extends an existing truce.
Investors say any surprise uptick in inflation could force the Fed to hold off on easing, a move that could test the resilience of the market's record-breaking run.
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