A historic week comes to an end! The most 关注 ed event in the market this week: the US CPI

With the dust settling on the U.S. elections and the Federal Reserve's interest rate cut in November, market focus has quickly shifted to the heavyweight inflation data set to be released this week, particularly the U.S. Consumer Price Index (CPI).

At 21:30 Beijing time on Wednesday, the U.S. Bureau of Labor Statistics will release the October CPI data. The market generally expects:

October CPI to rise 2.6% year-on-year, an increase of 0.2 percentage points from the previous month's 2.4%, and a month-on-month change of 0.2% remaining flat from the previous value;

Core CPI year-on-year and month-on-month increases are expected to remain at 3.3% and 0.3%, respectively.

Bank of America Merrill Lynch stated that the October CPI and core CPI in the U.S. are expected to rise 0.2% and 0.3% month-on-month, but this increase is unlikely to have a significant impact on interest rates.

Analysts Ohsung Kwon and others at the institution noted in a report released last week that although there is upward pressure on prices during the economic recovery, this will not lead to significant changes in inflation expectations, nor will it threaten the Federal Reserve's inflation target.

Slowing Rate Cut Bets Strengthen

Last week, the Federal Reserve's FOMC meeting resulted in a widely anticipated 25 basis point rate cut. Powell stated at the post-meeting press conference that the fight against inflation is not over, core inflation remains somewhat high, and the job market continues to cool very slowly. The Federal Reserve will continue to cut rates, but if inflation cools stagnantly and the economy is strong, rate cuts can be slower. In the short term, the U.S. elections have no impact on monetary policy, and future fiscal policy impacts will be taken into account; the U.S. deficit and fiscal policy are economic headwinds.

Although the Fed did not hint at pausing actions next, Wall Street's bets on slowing rate cuts seem to be quietly warming up. Goldman Sachs currently expects that the Federal Reserve will cut rates by 25 basis points at the meetings in December, January, and March, followed by cuts of 25 basis points in June and September next year. Previously, Goldman Sachs predicted cuts of 25 basis points in May and June.

Currently, CME tools indicate a 65% probability of a rate cut in December, and a 23.6% probability of continuing to cut rates in January next year.

Bank of America Merrill Lynch pointed out that although the election results are now "set in stone," policy uncertainty remains high. The Federal Reserve cut rates by 25 basis points at the November meeting as expected, and its communication indicates that a rate cut in December is possible. This suggests that the Federal Reserve may remain vigilant about the current economic situation and be prepared to take further easing measures to support economic growth.

Do Not Fight Against Market Trends, Especially in the Short Term

Bank of America Merrill Lynch also emphasized not to fight against market trends, especially the short-term upward momentum following the U.S. elections.

The report noted that momentum after the elections typically lasts for the following weeks. When the stock market achieves a significant increase on the first day after the election, historically, in the past election cycles, the stock market has been positive 100% of the time in the following two weeks Interest rates have basically returned to pre-election levels, which has at least alleviated the main concerns regarding stocks for now.

After this round of elections, the S&P 500 index rose 2.5% on the first day following the results, marking its best performance since 1928.