CPI Preview: The First "Miss" Of 2024?

While the March payrolls number came and went, and despite being boiling hot the market resumed its upward ascent without a glitch (perhaps because it realized that handing out millions of jobs to illegal aliens does little to tighten the labor market and push wages higher, even if it supposedly scores political points for the White House), tomorrow's CPI is a different story: as Goldman trader Lindsay Matcham summarizes the prevailing sentiment, "anything inline or under and its off to the races for a next leg higher in equities, bonds, gold, bitcoin etc ie a continuation of the everything rally. A hot number and it’s risk off given it would be a third hot print in a row and positioning is stretched."

That's really the TL/DR of what to expect from the market tomorrow... with one major provision: a red-hot CPI print and the Fed will likely be unable to twist narrative expectations for a June cut in time absent something big breaking (as even Kashkari asked, why would the "data dependent Fed" be cutting if inflation is again ascendant), which in turn means that the Fed would unlikely cut in 2024 as any rate cut during the July 31 meeting (really August) would be seen as too close to the November elections and would prompt howls of outrage from Trump, republicans and a majority of the population. Furthermore, should rate cuts be taken off the table, expect a collapse in risk assets, as the market realizes that unless it itself crashes, the Fed will not move.

Which is why we are rather confident that after three consecutive months of core CPI coming in hotter than expectations...