US inflation spikes to 3.8%, sparking market fears ahead of elections
US inflation has surged again, raising concerns about financial markets. April’s data revealed wholesale prices at 6% and consumer prices at 3.8%. Analysts now warn that persistent rises could push inflation past 5% by the November midterm elections.
The latest figures show a sharp acceleration in US price growth. If the Consumer Price Index (CPI) keeps climbing by 0.4% each month, it may exceed 5% before the year’s end. This trend has put investors on edge.
Historical patterns suggest trouble ahead. When CPI breaches 4%, the S&P 500 has typically fallen by 4% within three months and 7% over six. Bank of America strategists now expect profit-taking in early June as inflation fears grow. Yet not all analysts share this caution. Morgan Stanley remains optimistic, predicting the S&P 500 will reach 8,300 points in the next 12 months. The current rally in US and Asian markets has been fuelled by strong corporate earnings and excitement over AI advancements. Despite these gains, risks remain. Investors appear to be overlooking persistent inflation pressures and escalating tensions in the Middle East, where conflict involving Iran continues to simmer.
The inflation surge has set off alarms for stock markets. If the trend holds, further declines could follow historical patterns. Meanwhile, some firms still bet on continued growth, leaving investors divided on the path ahead.
