Investors entering a new bull market in stocks will closely monitor inflation data and the Federal Reserve’s monetary policy decision this week.
On Tuesday morning, investors will receive the Consumer Price Index (CPI) for May, followed shortly by the Federal Open Market Committee (FOMC) meeting, which concludes with Wednesday’s policy announcement.
Market expectations suggest that the FOMC may announce a pause in the Fed’s rate-hiking cycle, a deviation from the trend of raising interest rates at the past 10 meetings. The outcome of Tuesday’s inflation reading could potentially impact this outlook.
Additionally, key economic data to watch this week includes retail sales for May and the initial reading of consumer sentiment in June from the University of Michigan.
Corporate earnings releases will be relatively sparse during this period.
Following the S&P 500’s entry into bull market territory, marking the end of the longest bear run since 1948, stocks celebrated with modest gains. The Nasdaq extended its winning streak to seven weeks.
Bank of America’s research indicates that in the 12 months following the start of a bull market, the S&P 500 rises 92% of the time, surpassing the historical average of 75% over any 12-month period dating back to the 1950s.
For the May CPI, which includes food and energy prices, analysts predict a year-over-year increase of 4.1%, indicating a decrease from April’s headline number of 4.9%. Month-over-month, prices are expected to rise by 0.4%. April’s data marked the slowest year-over-year inflation reading in two years, and a 4.1% increase in May would be the slowest since April 2021.
On a “core” basis, which excludes food and energy prices, inflation is projected to rise 5.2% over last year in May, reflecting a slowdown compared to April’s 5.5% increase. Monthly core prices are also expected to increase by 0.4%.