June 13, 2023, 11:22 am EDT
Mild inflation data Consumer Price Index (CPI) was released earlier today that injected another optimistic momentum for the stock market.
It is a sign that the economy would boom again if inflation is not a threat. Consequently, the red hike cycle hosted by Fed could be paused, at least for some time.
The above expectations could be true for investors or market participants as shown by the new highs of the major indexes like Nasdaq and S&P 500.
However, we want to point out one perspective as cautious notes for this rally. The global economy is under the pressure of inflation, the Russia-Ukraine war continues, and the economic collapse of China is still on the way. More importantly, Over-supplying currencies do not stop. It means that inflation is not over. Moreover, it could rise again quickly if Fed decides to stop the rate hike.
Currently, CPI of 5.3% is still far above the goal of 2% so it is not the time to feel relief.
Practically, it could be a good time to allocate positions in inflation-sensitive assets like commodities in materials. Many commodity stocks were beaten down since early 2023 such as AA, FCX, STLD. They just came above the water to breathe the fresh air where it could be opportunities to add to watchlist or portfolio.