Latest Business News
The S & P 500 Could Jump 100 Points After Lighter-Than-Expected Inflation Reading
Possible Upside Surprise in Core CPI
Tom Lee, founder and head of research at Fundstrat Global Advisors, suggests that the S & P 500 may experience a significant increase of 100 points following a lighter-than-expected inflation reading this week. Lee expects the core consumer price index (CPI) to come in at 0.2% or better, which could surprise investors on the downside. Economists predict that the core reading, excluding volatile food and energy costs, will increase by 0.3% from the previous month with an annual basis of 5%. If Lee's prediction comes true, the S & P 500 could reach a new high for the year near 4,500.
Potential for Repeatable 0.2% Readings
According to Lee, the 0.2% readings in core CPI could potentially be repeatable in the next few months, indicating that the Federal Reserve is successfully reducing inflation to its annual target of 2%. If this occurs, Lee anticipates a decline in short-term yields, which could trigger a rally in the market. The recent rise in the 2-year Treasury yield to a 16-year high has caused concerns among investors. However, Lee remains optimistic about the market's performance.
Bullish Outlook for S & P 500
Lee, who accurately predicted a bullish market for this year, has recently raised his year-end S & P 500 target to 4,825. This would place the benchmark at a record high. Lee's prediction is more bullish than those of other strategists at major investment banks, whose average target is 4,227. While there may be entrenched skepticism, Lee believes that Wednesday's CPI report could shatter this skepticism and provide positive news for the Federal Reserve to justify a slower pace. Earnings for S & P 500 companies, excluding the energy sector, have remained strong, further supporting a potential rally in equities.
Conclusion: Potential Impact on New Businesses
The potential jump in the S & P 500 after a lighter-than-expected inflation reading has implications for new businesses and entrepreneurs. Here's a "hot take" on how this topic might impact them:
Favorable Market Conditions
If Tom Lee's prediction of a significant increase in the S & P 500 comes true, it could signal a bullish market sentiment. This could create favorable conditions for new businesses, as investors become more confident in the overall economic outlook. When the stock market is performing well, it often leads to increased consumer spending and investment, which can benefit startups and small businesses.
Potential Funding Opportunities
A rally in the market following positive CPI reading could also mean increased access to funding for new businesses. As investors gain confidence, they may become more willing to invest in promising startups, providing the necessary capital for growth and expansion. This could be an opportune time for entrepreneurs to seek out funding and showcase their innovative ideas to potential investors.
Industry-specific Implications
It's important to note that the impact of the S & P 500's performance may vary across industries. While a bullish market overall can benefit many sectors, certain industries may see more significant shifts. For example, technology companies could experience increased demand and valuation, attracting attention and funding from investors. On the other hand, industries tied to commodities or raw materials might face challenges if inflation remains a concern despite the lighter-than-expected CPI reading.
In conclusion, the potential market rally driven by a positive CPI reading has the potential to create a favorable environment for new businesses. Entrepreneurs should be mindful of the investment opportunities that could arise from increased market confidence and consider how the performance of their specific industry may be impacted.
Article First Published at: https://www.cnbc.com/2023/07/10/tom-lee-says-the-sp-500-may-rally-100-points-on-a-lighter-inflation-reading-this-week.html.svg)
