CPI cooling triggers sentiment repair—don’t misjudge a trend reversal

After the U.S. June inflation data was released, market sentiment quickly rebounded, and many people are eager to declare a brand-new market cycle. It’s worth sorting out the true logic behind it.

All inflation indicators this time came in below market expectations across the board, with core data flat. This effectively eased the prior tightening-related panic and drove a broad rebound in risk assets. This rally was sparked by revisions to pessimistic expectations, not by any fundamental improvement in fundamentals.

The latest decline in inflation mainly relied on the earlier drop in energy prices, making it a stage-specific, short-term tailwind. Combined with unstable Middle East geopolitical conditions, oil prices still have room for repeated volatility, and the external environment remains full of uncertainty.

Overall, what we’re seeing now is only a stage-by-stage repair at the expectations level, not a reversal of the medium- to long-term trend. Going forward, choppy volatility is likely to become the norm again.
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