Ahead of the CPI report, Bank of America advises caution. Historical data suggests strong summer performance for the S&P 500 and Bitcoin in election years.
Bank of America has advised investors to hold their positions and resist selling ahead of the upcoming Consumer Price Index (CPI) report. This guidance comes as the US Bureau of Labor Statistics is set to release the CPI data for April 2024 on May 15, which is expected to show ongoing inflationary pressures.
The Cleveland Federal Reserve forecasts a 0.4% increase in headline inflation and a 0.3% rise in core inflation. If these predictions hold true, it indicates that inflation remains significantly above the Federal Reserve's 2% target.
Despite the Federal Reserve’s efforts to curb rising prices through interest rate hikes, inflation has remained persistent, particularly in the shelter category, affecting the CPI index. The Federal Open Market Committee (FOMC) is hopeful that a reduction in shelter costs will aid in achieving their inflation target, although this trend has not yet materialized.
Bank of America analysts recommend holding investments, citing historical data that the S&P 500 typically performs well during the summer months, especially in presidential election years. From June to August, the S&P 500 has historically yielded an average return of 3.2%, increasing to 7.3% in election years. Additionally, Bitcoin’s average return during election years stands at 23.68%.
The upcoming CPI report and subsequent Federal Reserve actions are expected to have significant impacts on the crypto market. Institutional interest in Bitcoin, as demonstrated by substantial holdings reported by firms such as Susquehanna International and Hightower, suggests confidence in Bitcoin’s potential as a hedge against inflation and economic uncertainty.
Investors are advised to remain cautious and avoid hasty selling as the interplay between inflation data, Federal Reserve policies, and market trends will shape the financial landscape in the coming months.
