The story behind the US stock market shock and the US inflation continues to rise

Recently, the US stock market has experienced a roller coaster market, the three major stock indexes have opened lower, although in the end a little rebound, but ultimately failed to get out of the slump. The Dow fell 1.09 per cent, the Nasdaq 0.84 per cent and the S&P 500 nearly 1 per cent. This wave of stock market volatility is closely linked to the just-released US inflation data for March.

The official US consumer price index (CPI) rose 0.4 per cent in March, slightly higher than economists had expected. The increase pushed year-on-year growth to 3.5 per cent, ahead of market expectations. This data undoubtedly brought a big shock to the market, but also let investors bring more uncertainty about the Federal Reserve's harvest strategy and future direction.

Looking back at history, the Federal Reserve has successfully completed a round of global harvest by raising interest rates in the past few cycles. But this time, things seem different. Higher interest rates and a longer cycle of rate hikes have not brought down major economies, but the United States itself. Therefore, the Federal Reserve has to adjust the strategy, through the full issue of money to maintain economic prosperity, downward revision of non-farm data, with CPI trends to create interest rate cut expectations to deal with the current predicament.

However, just when the market began to expect a rate cut, the release of the inflation data dashed that expectation. Investors are starting to worry that the Fed may play fast and loose with rate cuts until it achieves its own harvest goals.

Since November last year, the U.S. inflation index has exceeded expectations for several months in a row, a trend that could have an impact on the upcoming 2024 U.S. election, putting more pressure on the Biden administration.

Former US President Donald Trump put it bluntly in his post: "Inflation is back and it's raging!" He further accused the Fed of being unable to convincingly lower interest rates because their goal was to protect the worst president in American history - Joe Biden.

The Biden administration, however, responded. After the CPI report was released, Biden issued a statement calling on businesses, including grocery retailers, to use record profits to lower prices. He also criticized the tax cuts proposed by congressional Republicans, arguing that they would benefit billionaires and big corporations while potentially leading to higher prices by special interests and big drug companies.

While the U.S. economy is doing just fine by key measures like gross domestic product and unemployment, stubbornly high inflation and large budget deficits remain issues that the White House and the Biden campaign want to downplay. Trump has been working to amplify the issue in an attempt to gain an advantage in the upcoming general election.

There have been reports that US consumer confidence has begun to show glimmers of optimism, but voter polls have found that Americans have fond memories of the economy under Trump. This contradiction may reflect the mixed mood of the American people about the state of the economy and the different expectations that different leaders have for how to handle it.

Overall, the rebound in US inflation indicators has not only raised concerns in the markets, but also intensified antagonism in the political sphere. The future direction of the Federal Reserve's monetary policy remains a mystery, and investors need to keep a close eye on various economic indicators and data for future investment clues. In this volatile market, it is important to remain calm and rational.