The January report of the CPI was hot, much hot than expected, and increased the risk of FOMC stiffness. Not only a higher level near the current levels, but also a decrease in chances for even one 25 base level in 2025, and the growing potential will return to the table. This increases the chances of a recession caused by the Fed, but the possibilities for investors are preserved. Inflation is a hot problem, but has not yet influenced economic activity or an upward trend in promotions.
Economic activity remains solid, with a forecast of GDP Q1 in the first quarter. This means for investors is the continuation of the growth of the stock market and the high probability that the upward trend in S&P 500 NYSEARCA: Spy will continue. The market retreated after the release of the IPC and can deepen the move before the rebound, but the rebound is the most likely result; CP-induced DIP is the possibility of buying.
Health of the labor market, revenue growth and capital profitability Support S&P 500 Uptrend
The labor market is one of the reasons why the CPI report is less sales than some think. January work on labor included significant annual changes, but correspond to trends. The trends include a sustainable creation of jobs, accelerating the growth of employment at the end of the year, a low level of unemployment and growing wages. The salary has grown in 4%+ pace, which is a critical factor for inflation and the prospects of consumers underlying inflation, while supporting consumer health. According to CPI, inflation increased by 3.0% and 3.3% at the header level and the main level, leaving the “average consumer” stronger than a year ago, despite higher prices.
S&P 500 revenue growth is also a factor why the index may rally above. A decrease in the chances of lower indicators will affect prospects, but, nevertheless, growth is expected. As it is, consensus numbers involve steady growth in Q12025 compared to 2024 and consistent acceleration throughout the year. The difference is that all sectors will contribute to growth compared to nine in 2024, and six grow by more than 10% and leaders, including technologies, healthcare and industrial. In 2026, it is expected that these trends will continue and produce another year of income growth in the middle of adolescents.
The income in themselves is crucial, but to a greater extent from the influence on the profitability of capital. S&P 500 companies will increase dividends and redeems on average by an average of high and low -chosen amounts in 2025 and maintain a trend in 2026. This means a reduction in the amount of share, aggravated by the growth of the business, the distribution of dividends and the improvement of the balance, the balance sheet balance sheet, which are a strong fair wind for shareholder value.
Risk is inflation; This is accelerating
Risk – inflation. The January data is hot and show acceleration, contrary to the expected reduction. Inflation can continue to accelerate in this scenario, since the Fed’s policy can be too condescending, and Trump’s policy is expected to be inflationary. On the one hand, tariffs can affect prices, while on the other hand, it is expected that the softening of business intermediaries will contribute to expansion and investment in labor.
The market responded to the news, as expected, immediately after the release of S&P 500. Nevertheless, the traders took advantage of the early morning sales as an opportunity, demonstrating their support for a 30-day EMA. If this level continues to maintain, the market can quickly bounce and rise to install new maximums. If not, then the S&P 500 can switch to a level of 5960 to 5790, where support is more solid. In this script, the market may remain in the range until the end of the year.
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