Equity markets advanced on Monday in hopes that the CPI data will confirm the cooling of inflation. The risk for investors is that it will come in hotter than expected and prove the FOMC right to sound so hawkish. Even if the CPI comes in as-expected, it calls for a 5.4% increase in core consumer inflation versus last year, which is no reason to think the FOMC will back off its policy stance soon.

The most significant risk for the market, as always, is the earnings outlook. The S&P 500 earnings growth outlook continues to deteriorate and may soon turn negative for the year. In this scenario, US businesses are already in an earnings recession, which could linger until the end of the year. The good news is that this year's decline will set the market up for a return to growth in 2024, but that assumes the FOMC will start lowering rates by then.