US stocks hovered around all-time highs on Tuesday, after investors began to consider the potential impact of rebounding inflation on monetary policy. Apparently, they are trying to balance economic recovery with the dovish stance of the Fed, as well as the high valuations and imbalances in the global Covid vaccine rollout. Volatility returned to the market ahead of the US CPI report and the Fed's policy decision on Wednesday.
According to Brian Walsh Jr., senior financial advisor to Walsh & Nicholson Financial Group, prices will only climb higher, which will trigger inflation. However, the Fed remains firm on its decision not to tighten monetary policy much earlier than scheduled, regardless of the ongoing jump in inflation.
The central bank's statements do soothe investor concerns on inflation and monetary policy, but traders still need to remain cautious on the upcoming inflation data on Tuesday.
Fiona Cincotta, senior financial markets analyst at City Index, said: "The tight trading ranges this month reflect the cautious market sentiment ahead of inflation. Delaying action, or even inaction, may lead to an economic turmoil, which markets fear. "
Key events this week are:
- Apple's annual developers conference (June 11);
- monetary policy meeting of the European Central Bank (Thursday);
- negotiations on the 2015 nuclear deal (Thursday);
- report on US CPI (Thursday);
- G7 summit (Friday)
