CPI forecast (Feroli / JPM Economics)
The baseline call is for a firm CPI print, driven by technical “catch-up” effects after a period of disrupted data collection.
Headline CPI (MoM): +0.38%
Core CPI (MoM): +0.41%
Implied YoY: 2.7% headline, 2.8% core
Why they expect a “pop” in this print
Government shutdown distortions: BLS reportedly held prior-month prices constant (effectively “flat-lined” some components), which can mechanically boost the next update when prices “reset.”
Holiday sales oversampling: Data collection resumed later, potentially over capturing sale prices in the prior month (especially for goods), which would have artificially depressed goods inflation—setting up a bounce-back.
Scenario map: Core MoM vs. 1‑day SPX move (Trading desk view)
They focus on core MoM buckets and assign probabilities + typical 1‑day SPX reaction ranges.
5.0% prob: Core MoM > 0.45% → SPX −1.25% to −2.5%
32.5% prob: Core MoM 0.40%–0.45% → SPX +0.25% to −0.75%
40.0% prob: Core MoM 0.35%–0.40% → SPX +0.25% to +0.75%
20.0% prob: Core MoM 0.30%–0.35% → SPX +1.0% to +1.5%
2.5% prob: Core MoM < 0.30% → SPX +1.25% to +1.75%
Options market “expected move”
Options expiring Tuesday price about a ~0.6% move (as of Fri Jan 9 close).
Desk takeaway (positioning + asymmetry)
Their framing is: fundamentals lean hawkish, but equity tape outcomes are skewed bullish.
Setup: markets are “bulled up,” and they see hawkish print risk > dovish print risk.
But SPX reaction distribution isn’t symmetric (they explicitly argue the market’s upside/downside behavior isn’t balanced).
Since Oct 1, 2025: 5× +1% up days vs 7× −1% down days (used as context for skew/behavior).What components they highlight (mechanics under the hood)
This section is basically “why the seasonal/collection quirks matter.”
Vehicles
New vehicles: tracked industry data suggests ~+0.6% in December.
Used vehicles: wholesale declines imply ~−1.0% SA.
Broad goods & services impacted by bimonthly sampling
Many prices may not have been properly refreshed since August due to bimonthly collection schedules + shutdown disruption → potential upward catch-up (they cite medical care as an example).
Shelter (OER & rent) has its own lag/rotation issue
Because shelter is collected on a rotating 6‑month panel, treating October as “unchanged” likely biased down measured OER/rent.
They expect December shelter prints to better reflect underlying trend, potentially ~2× November’s shelter pace.
The “bias down” from the skipped update may persist until the relevant panel refreshes (they mention next April).
Business surveys (ISM/PMIs) suggest:
Input prices still rising
Earlier reluctance to raise selling prices (protect market share), but with recent GDP strength, more firms may be passing costs through.
Tariff pass-through context (JPM PB estimate): ~45% vs ~70% in “Trump 1.0”.
Macro risk: another inflation peak is seen as a higher-probability equity risk in 1H26.
Policy implication: CPI + Friday’s NFP could push Fed cuts further out; Feroli’s view: Fed takes no action in FY26.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!