The Zhitong Finance App learned that on May 21, Zhao Yaoting, a global market strategist at Invesco Asia Pacific (excluding Japan), published an article stating that the US consumer price index (CPI) for April was roughly in line with agreed expectations, and there was no unexpected increase. With inflation data exceeding expectations for several months in a row, this is certainly a relief. Both core and overall CPI continued to slow in April, dispelling concerns about a renewed acceleration in US inflation. Coupled with monthly retail sales figures that fell short of expectations, it was confirmed that the anti-inflation process was back on track and growth began to decline. Needless to say, April's inflation and growth data is the first data we've seen since the beginning of the year that can push the Federal Reserve to raise interest rates ahead rather than delay.
Notably, housing inflation in April (accounting for the largest share of the CPI, accounting for about 42%) finally eased, and prices of core commodities such as automobiles also recorded a decline. Coupled with the disappointing retail sales data for April, a 0.0% month-on-month increase (the forecast is +0.4% month-on-month increase) and the data for previous months was revised downward, indicating that US consumption was weaker than earlier expectations. Negative revisions may further weaken the already weak first-quarter gross domestic product (GDP).
Furthermore, judging from Chairman Powell (Powell)'s recent remarks, Zhao Yaoting believes that the first rate cut will still occur in September. However, if the anti-inflation process continues in May and June, the Federal Reserve may also act far ahead of market expectations and begin cutting interest rates in July.
For investors in the Asia-Pacific region, Zhao Yaoting expects US bond yields to decline and the US dollar to weaken in the next few months. This means that emerging market assets, especially emerging market Asian assets such as currencies and stocks, are expected to start rising in the middle of the year. On the US side, as inflation expectations begin to decline, especially as CPI data slows down, cyclical and small to medium companies are likely to perform well. In terms of basic factors, compared to the US, Zhao Yaoting favors emerging markets and emerging market Asian stocks because US stocks have now peaked. If US stocks want to continue to rise, core CPI inflation must drop sharply from April data, so that the Federal Reserve can implement more aggressive interest rate cuts this year.