Recently, while studying the trend of the U.S. stock market, I found that many Taiwanese investors actually confuse a key indicator—the PCE index—what it is and why it’s more important than CPI. Honestly, if you want to accurately judge the short-term movements of the U.S. and Taiwan stock markets, you really need to understand this indicator well.

PCE stands for Personal Consumption Expenditures Price Index, which simply measures the price changes of everyday goods Americans buy. The Federal Reserve (Fed) pays special attention to this data because it more closely reflects actual consumer behavior than CPI. The main difference is that CPI’s weighting is fixed, usually adjusted only every two years, while PCE dynamically adjusts quarterly based on actual purchase data, meaning PCE can more promptly reflect changes in consumer habits. Additionally, PCE covers almost all personal consumption expenditures, whereas CPI only covers goods and services directly consumed by households, covering about 40% of U.S. GDP.

Every time PCE data is released, the market’s real focus is on the “Core PCE,” which is very important. Core PCE excludes volatile items like food and energy, providing a more accurate reflection of long-term inflation trends. I remember the data from March 2026: the overall PCE monthly growth rate surged to 0.6%, but core PCE was only 0.3%. Why such a big difference? Because short-term oil price increases pushed up the overall figure, but core consumer prices didn’t rise that much. In such cases, the Fed is less likely to raise interest rates easily, and the market will focus on core PCE, ignoring the overall PCE.

What determines PCE influences how the U.S. stock market moves. If core PCE exceeds expectations, it indicates overheating inflation, and the Fed might raise interest rates, which is especially unfriendly to high-valuation tech stocks—Apple, Microsoft, NVIDIA, and similar stocks usually decline. Conversely, if core PCE is below expectations, the market anticipates rate cuts, and U.S. stocks, especially tech stocks, tend to rally strongly. The March case last year is a typical example: core PCE monthly growth was 0.3%, below the expected 0.4%. That night, the Nasdaq surged 1.2%, and NVIDIA rose 2.5%.

For Taiwanese investors, this impact indirectly transmits to the Taiwan stock market. Taiwanese electronics stocks and U.S. tech stocks are highly correlated; TSMC, MediaTek, and these companies’ export markets are mainly the U.S. If PCE data is negative, U.S. stocks fall, and Taiwanese electronics stocks usually follow suit; if PCE data is positive, U.S. stocks rise, and Taiwanese electronics stocks tend to go up as well. Moreover, PCE also directly affects the USD and TWD exchange rates. If inflation heats up, the dollar appreciates and the TWD depreciates; if inflation slows, the dollar depreciates and the TWD appreciates. This has a big impact on your currency costs when investing in U.S. stocks.

PCE is usually announced on the Taiwan time on the fourth Friday of each month at 8:30 p.m. (during daylight saving time, at 7:30 p.m.), which coincides with the U.S. stock market open. Once the data is released, U.S. stocks will immediately fluctuate, and the Taiwan stock market the next day will be affected. So I check market expectations an hour earlier to confirm my positions, then decide how to act based on the actual data versus expectations.

The actual trading logic isn’t complicated. If core PCE exceeds expectations, I immediately cut losses on my U.S. tech stocks and wait to see how the market stabilizes. If it’s below expectations, I take the opportunity to add to tech and growth stocks because rate cut expectations will boost these assets. If PCE meets expectations, I keep my positions unchanged—don’t blindly add or reduce. The next day, I also adjust my Taiwan electronics stock positions based on how U.S. stocks move.

Long-term, the year-over-year growth rate of core PCE can help you judge the overall market environment. If it stays between 2% and 2.5%, that’s the ideal environment—safe to deploy tech and growth stocks. If it exceeds 3%, inflation is overheating, and I shift to defensive sectors, reducing my tech holdings. If it drops below 2%, the economy might be heading into recession, and I increase bond and cash allocations.

A key reminder: don’t rely too heavily on PCE alone. It’s just one factor influencing U.S. and Taiwan markets; you should also consider non-farm payrolls, GDP data, individual stock earnings, and more. Also, market volatility after PCE releases can be significant, so set stop-loss and take-profit orders, strictly control your positions, and avoid blindly following the market out of fear.

In summary, understanding what PCE is, how it influences the market, and how to operate based on it will make your market judgments more precise. In the short term, you can trade based on whether PCE exceeds or falls below expectations; in the long term, adjust your portfolio according to the trend of core PCE. As long as you grasp this indicator, your success rate in investing in U.S. and Taiwan stocks will significantly improve.