JPMorgan Projections Unveiled: 5 S&P 500 Scenarios Based on CPI Changes, from Rallies to Sell-Offs

JPMorgan’s traders assign a 37.5% probability to a scenario where the Consumer Price Index (CPI) rises by 0.2%-0.3%. In this case, they anticipate a subsequent S&P 500 rally ranging from 0.25% to 0.75%. They note that a print at the lower end of this range would reinforce confidence in the disinflationary trend. This, in turn, might lead to further rotation in equities, particularly into more Cyclical/Value sectors.

With a 30% likelihood, another scenario is considered where CPI experiences a 0.3%-0.4% increase. JPMorgan warns that this might result in a 0.5%-1% drop in the S&P 500. The concern here revolves around the potential reacceleration of inflation, prompting negative market reactions.

In a scenario with a 22.5% chance, if CPI rises between 0.1% and 0.2%, JPMorgan envisions a S&P 500 rally of 1%-1.5%. This expectation is based on the anticipation of delayed housing disinflation showing up in the print, along with a larger-than-expected decline in vehicle prices.

JPMorgan assigns a 7.5% probability to a more significant CPI increase, exceeding 0.4%. In this case, they predict a substantial S&P 500 sell-off ranging from 1.75% to 2.25%. The underlying fear is described as a “second peak in inflation,” which could trigger negative market sentiment.

The least likely scenario, with a 2.5% chance, involves CPI rising less than 0.1%. JPMorgan suggests that this could trigger an “Everything Rally” in stocks, lifting the S&P 500 by 1.5%-2%. They explain that such an outcome might coincide with the bond market raising expectations for a rate cut in May, potentially exceeding the current level of approximately 23%.