Just when we thought the Yanks had done what we haven’t been able to do (beat inflation to see interest rates fall), along came a bigger-than-expected inflation reading in the US. So, with the Middle East spooking stock markets when fears of either Iran or Israel escalating the war increase, the question is whether we should be worried about our stocks and our super going into a slide?

Let’s start with the news overnight that said September’s Consumer Price Index, which rose 0.2% on a monthly basis, bringing the annual inflation rate to 2.4% from the previous year. Economists expected a 0.1% rise and annual inflation would be 2.3%, so it’s not a big miss. And this number alone shouldn’t derail the rally in stocks, but it does raise some doubts about how the US is beating inflation and could slow down the central bank’s rate cutting.

Lower interest rates are good for stocks. That’s why the US stock market is up 32.4% for the past year. Meanwhile, our market was up 16.01%. The difference reflects our slower job in reducing inflation and also because we don’t have the tech companies that are cashing in on the Artificial Intelligence boom.

While this number wasn’t a big worry (being only 0.1% higher than expected and the annual number was the best since February 2021), it does follow a better-than-expected jobs number last Friday.

Then 254,000 jobs were created in September and the unemployment rate fell from 4.2% to 4.1%, which suggested the Yanks were pulling off the ‘Goldilocks on steroids’ play for lowering the jobless rate and the inflation rate simultaneously.

For those forgetting their fairy tales, Goldilocks found the best porridge that wasn’t too hot or too cold but just right.

This inflation reading will take a little bit of positivity out of the US market and put big stock market players on data-watch to see if this is an early sign that inflation won’t easily get to the 2% target the Federal Reserve wants to get to.

The news could slow down the rate cuts in the US and reduce the number of cuts that happen, but it might not be all bad news. It’s possible that the US could avoid a big spike in the unemployment rate and achieve a lower rate of inflation because of the benefits of advanced technology and AI.

Ultimately, we’ll find out, but there’s no reason for the market to go excessively negative on this inflation news.

A few weeks ago, I would’ve said that stocks could face headwinds from the Middle East war and its impact on oil prices. Then there was a slowing Chinese economy, but last week Beijing announced a big stimulus program.

The US election was seen as a possible curve ball but right now Wall Street doesn’t seem to be worried about who might win.

All along I’ve been tipping a bit of volatility for stocks because the US gains have been so big, and profit-takers often do exactly that — take profit after big stock price rises.

That said, after the US election, provided inflation doesn’t keep rising, I expect stocks to have another leg up. All this means markets and yours truly will be watching the economic data drops in the same way a labrador watches a sausage on a backyard barbie!