JPM US Market Intelligence Desk View: Asymmetric Risk, Bond Market More Sensitive to Hot Prints

The July CPI print is a key near-term macro catalyst because it will shape the market’s view of whether inflation is re-accelerating or whether another disinflation window is opening. The desk framing is that equities are cleaner, but the bond market is more vulnerable to an upside inflation surprise, which creates an asymmetric reaction function.

Feroli’s forecast:

The desk’s scenario analysis focuses on core CPI MoM and 1-day S&P 500 moves.

1. JPM Market Intel CPI Scenario Matrix

The probability-weighted expected reaction is mildly positive but with meaningful left-tail risk.

Using midpoints:

Approximate probability-weighted SPX move:

−0.10%−0.219%+0.200%+0.188%+0.075%=+0.144%−0.10%−0.219%+0.200%+0.188%+0.075%=+0.144%

So the desk distribution is slightly positive on average, but downside is sharper if core CPI prints hot.

2. Options Pricing

Options expiring on August 12 were pricing roughly a:

• 0.9% move

based on August 7 prices.

The desk notes this is slightly below recent history, where implied CPI event moves have been closer to:

• 1.1%

That means CPI vol is not especially rich.

In the prior close update, the S&P implied move through the next close was cited closer to 0.59%, reflecting more recent pricing / decay into the event. Either way, the key message is:

The market is pricing a relatively contained CPI move compared with prior inflation events.

3. Why the Reaction Is Asymmetric

The desk explicitly frames the bond market as more sensitive to inflation spikes.

The reason:

• real yields are already high

• nominal 5y5y yields have moved higher despite softer macro data

• CTAs remain short Treasury futures

• inflation expectations have eased, so a hot print would challenge the disinflation narrative

• equity positioning is cleaner, but rates are still the key transmission channel

Thus:

Hot CPI→Yields Up→Equity Multiple PressureHot CPI→Yields Up→Equity Multiple Pressure

The hawkish print hurts more than a dovish print helps because the market is already concerned about sticky inflation and high real rates.

4. Fed September Hike Probability

The next two inflation prints are important for assessing whether the Fed hikes in September.

The market has moved away from a Middle East-driven inflation spike / recession scare, but it still needs confirmation that core inflation is not re-sticking.

The key question:

Was June’s weak core CPI the start of another disinflation period, or just a one-off downside surprise?

Feroli does not expect payback for June, but he does expect July to re-firm.

That is important:

• June core CPI: -0.02% MoM

• July core CPI forecast: +0.22% MoM

This is a normalization, not a payback.

5. Feroli’s Core CPI Forecast Details

Feroli expects:

• headline CPI: +0.12% MoM

• core CPI: +0.22% MoM

• core goods: +0.1%

• core services: +0.2%

The forecast is basically:

Energy is a drag, food is steady, goods re-firm modestly, and services stabilize after June’s downside surprise.

6. Headline CPI: Energy Drag

Energy is expected to decline:

• total energy: -1.2% MoM

• motor fuel: -2.6% MoM, seasonally adjusted

Retail gasoline is expected to stay near:

• US$4.00/gallon

for the remainder of the year, though this remains sensitive to Middle East developments.

This matters because headline CPI should be contained even if core re-firms.

7. Food CPI: Stable Around 3% Annualized

Food prices have been steadily rising at roughly a:

• 3% annualized pace

Feroli expects July food CPI to pick up slightly:

• +0.3% MoM

after:

• +0.2% MoM in May

• +0.2% MoM in June

Food is not the main swing factor unless there is an unexpected jump.

8. Core Goods: Modest Re-Firming

Goods prices fell in each of the last two months, the softest period since 2024.

Feroli expects a return to moderate goods inflation in July due to:

• residual tariff pass-through

• rising tech prices

• business survey signals

• select product price hikes

Core goods forecast:

• +0.1% MoM

This is important because goods disinflation had helped suppress core CPI. If goods re-firm, the market may worry that the disinflation impulse is fading.

9. Apple Price Hikes Could Boost Education / Communication Goods

One notable detail is Apple’s June 25 price increases:

• computers up at least 15%

• tablets up at least 20%

Assumptions:

• Apple has roughly 20% US PC share

• Apple has roughly 50% tablet share

• PCs / tablets are 80% of global PC/tablet sales value

• tablets are 20%

• computers / peripherals / smart home devices are 39% of education and communication goods

• PCs/tablets are assumed to be 80% of that category

The estimated impact on education and communication goods is around:

• +1.4%, rounded to +1.5%

This is a key upside risk within core goods.

10. Vehicles: Mostly Stable

New Vehicles

New vehicle prices are expected to remain stable.

Industry data show little movement over the past few years.

Used Vehicles

Used vehicle CPI has not fully responded to earlier Manheim wholesale price increases.

Feroli expects:

• +0.2% MoM

for used vehicles.

This is a modest positive contribution, not a major swing.

11. Apparel and Household Goods: Tariff Effects Fading

Apparel prices jumped earlier in the year, likely due to tariff effects on new seasonal items.

But prices fell in June, and Feroli assumes:

• no further change in July

Household furnishings and supplies have been gradually falling since February, and that is expected to continue.

Recreational goods surged in June, especially sporting goods and toys, but only a small rise is expected in July.

12. Shelter: Still Softening

Rent and OER are expected to continue softening.

Indicators from:

• Zillow

• ApartmentList

remain soft.

Feroli expects July rent and OER to rise at a pace similar to:

• the average of 1Q and June

Shelter is still moving in the right direction for disinflation, but slowly.

13. Lodging: World Cup Effects Continue to Fade

Lodging away from home dropped sharply in June as pricing moved past the World Cup.

July should see further fading of World Cup-related pricing effects, but Feroli thinks most of the CPI adjustment has already occurred.

Smith Travel Research data showed completed-stay prices:

• up 5.2% YoY for week ending July 25

• down from 9.5% YoY for week ending June 27

So lodging may not be as large a drag as in June.

14. Airfares: Still Firm

Airfares were up:

• 27% YoY in June

driven by high fuel costs and limited seating capacity.

Jet fuel prices have come off highs, but Google Flights data suggest prices rose in July.

Feroli assumes:

• public transportation +1.0%

This is one potential services upside risk.

15. Auto Insurance: No Rebound Expected

Auto insurance prices fell sharply in recent months.

Feroli does not expect a rebound because:

• industry profit ratios had been high

• state-approved price changes have been consistently negative this year

The uncertainty is whether cuts continue.

Base assumption:

• declines may shrink, but no rebound

This helps cap services inflation.

16. Medical Care

Medical Care Goods

Medical care goods prices have been declining all year due to:

• Medicare drug price negotiations under IRA

• lower GLP-1 list prices

• more generics

Feroli expects only a small decline in July.

Medical Care Services

Medical care services inflation has softened recently, with three soft prints in four months.

YoY inflation is now:

• 2.9%, the lowest in 18 months

Feroli expects some re-firming in July.

17. China PPI Watch

The desk flags China inflation as a longer-term lead indicator.

China PPI tends to precede US CPI / PPI trends, and China’s PPI just printed a:

• 3-month low

This is potentially disinflationary for global goods prices.

However, the US-specific tariff and tech-price effects may still create near-term upside noise.

18. CPI Market Reaction Playbook

Core CPI Above 0.30%

Probability: 5%

Expected SPX move:

• -1.5% to -2.5%

Likely market behavior:

• yields spike

• September Fed hike odds rise

• USD rallies

• gold likely weakens initially

• NDX underperforms

• small caps sell off sharply

• ES breaks 7724

• vol reprices higher

This is the left-tail scenario.

Core CPI 0.25%–0.30%

Probability: 25%

Expected SPX move:

• -0.50% to -1.25%

Likely behavior:

• sticky inflation narrative returns

• yields higher

• bond market validates hawkish pricing

• equities fade

• small caps underperform despite cleaner positioning

• ES likely fails below 7751, tests / breaks 7724

This is the most important bearish scenario because it has a meaningful 25% probability.

Core CPI 0.20%–0.25%

Probability: 40%

Expected SPX move:

• +0.25% to +0.75%

Likely behavior:

• print is close enough to expectations

• no inflation scare

• vol decays

• yields stable to slightly lower

• ES reclaims / holds 7751

• SPX rotates toward 7800

• small caps may continue to outperform

This is the base case and should be modestly risk-positive.

Core CPI 0.15%–0.20%

Probability: 25%

Expected SPX move:

• +0.50% to +1.00%

Likely behavior:

• disinflation narrative improves

• yields decline

• Treasury CTA short-covering risk increases

• small caps outperform

• NDX can squeeze

• gold may rally

• ES breaks above 7800

• targets 7820 / 7845

This is the clean bullish scenario.

Core CPI Below 0.15%

Probability: 5%

Expected SPX move:

• +1.00% to +2.00%

Likely behavior:

• strong disinflation impulse

• September hike probability falls sharply

• yields drop

• Treasury CTAs may cover shorts

• small caps / Tech / duration outperform

• gold rallies

• USD weakens

• ES can accelerate toward 7845 / 7893

This is the right-tail squeeze scenario.

19. ES Tactical Overlay

Prior ES range:

• 7800 range high

• 7724 range low

• 7751 key pivot

CPI scenarios map neatly onto those levels.

The market is still effectively range-bound until CPI forces acceptance above 7800 or below 7724.

20. Tactical Conclusions

1. Base Case Is Mildly Bullish

The highest probability bucket is 0.20%–0.25% core, with SPX expected up 25–75bps.

2. Risk Is Asymmetric to Hot Prints

Hot CPI likely hurts more than soft CPI helps because the bond market is inflation-sensitive and real yields are already high.

3. Options Are Not Rich

Event pricing around 0.9% is below recent CPI pricing around 1.1%, and more recent SPX implied move estimates are even lower.

4. IWM Gamma Looks Interesting

Small caps have higher rate beta and IWM straddles imply the lowest event move since September 2023.

5. ES Breakout Path Requires Soft / In-Line CPI

A print at or below Feroli’s +0.22% core forecast should help ES hold 7751 and attempt 7800. A softer print can unlock 7820 / 7845 / 7893.

Feroli expects July CPI to print +0.12% headline MoM and +0.22% core MoM, corresponding to 3.4% YoY headline and 2.5% YoY core. The desk scenario analysis assigns the highest probability to a 0.20%–0.25% core MoM print, which would likely produce a 25–75bp S&P rally.

The risk is asymmetric: a hot core print above 0.25% could trigger a larger negative reaction through yields and Fed hike pricing, while an in-line or soft print should support equities, small caps, and possibly duration-sensitive Tech. Options are pricing a contained move, around 0.9% based on earlier pricing, versus recent CPI-event pricing closer to 1.1%.

The tactical equity map remains simple: 7751 is the ES pivot, 7724 is support, and 7800 is the breakout trigger. A soft or in-line CPI keeps the bullish range-breakout setup alive, while a hot print risks breaking the range lower.