• JPMorgan (JPM) forecasts a hotter-than-expected 0.39% monthly gain in core CPI for January 2026, raising risks of sharp S&P 500 swings.
  • The delayed report, pushed to February 13 due to government shutdowns, could trigger market moves of up to 0.75% on the upside or 2.5% on the downside.
  • Hawkish surprises are deemed more likely, though stagflation-style readings may see limited reaction, amid sticky inflation and Fed policy uncertainty.

U.S. stocks face potential volatility following Friday’s closely watched CPI report, with JPMorgan’s trading desk warning of sharp swings. Economists broadly expect core inflation to rise about 0.3% in January, translating to 2.5% year over year, but JPMorgan predicts a hotter 0.39% monthly gain, according to people familiar with the matter. The bank sees a 42.5% chance of a 0.35%-0.4% reading, which could lift the S&P 500 by 0.25%-0.75%. However, a print above 0.45%—a 5% probability—could trigger a 1.25%-2.5% drop.

Efforts to gauge inflation have hit a snag, with the January report delayed to February 13 due to government shutdowns, including an extended one and a four-day disruption in late January over DHS funding. This has distorted data collection, fueling uncertainty at the Federal Open Market Committee. Without timely data, markets brace for noisy outcomes, as the Bureau of Labor Statistics struggles with disruptions. CME FedWatch currently shows 94.1% odds of no March rate change, keeping the target range at 3.50%-3.75%.

JPMorgan says a hawkish surprise is more likely than a soft one, though it expects limited market reaction to a stagflation-style reading. The bank’s analysis points to sticky inflation driven by tight labor conditions, with unemployment hovering between 4.3% and 4.6%, shelter costs, and tariff pass-through. In a brief statement, a JPMorgan spokesperson noted, "We’re closely monitoring the data for any signs of reacceleration, which could impact our trading strategies." Attempts to reach other major banks for comment were unsuccessful.

December 2025 CPI met expectations at 2.7% headline and 2.6% core year-over-year, with food prices accelerating but core goods flat, doing little to shift Fed policy views. However, fiscal stimulus and tariff delays are pushing reacceleration risks into the first half of 2026. JPMorgan forecasts CPI rising to 3.5%-3.6% year-over-year by late 2025 or early 2026 before fading to 2.2%-2.8% by the fourth quarter of 2026. Growth may average 2.2% in 2026 but slip to 1.7% in 2027 without additional stimulus, with recession odds at 35%.

Political context adds complexity, as shutdowns from budget impasses have clouded the data landscape. Tariffs and potential fiscal stimulus before midterms sustain inflation above the Fed’s 2% target, with Chair Jerome Powell’s term ending in May 2026, potentially delaying rate cuts during the transition. The "misery index" stands at 7.3%, better than 76% of the past 50 years, but waning Fed easing expectations keep investors on edge. In a slightly more conversational tone, one trader remarked, "It’s a waiting game—every data point feels magnified right now."

Looking ahead, short-term risks include a hawkish surprise lifting yields and hurting stocks, though JPMorgan’s baseline suggests limited reaction. Long-term, inflation is expected to drift to 2%-2.8% by late 2026, possibly enabling one Fed cut if it falls below the 2% target after five years. Growth may slow without stimulus, with New York Fed President John Williams predicting a peak at 2.75%-3% in the first half of 2026, then easing to 2.5%. Global recession risk remains at 35%, with parallel tariff effects weakening the dollar, though low energy prices offer some mitigation.

Correction: An earlier version misstated the probability of a CPI print above 0.45%; it is 5%, not 10%.