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<ul class="summary-list"><li>A blockbuster jobs report raises the stakes for upcoming inflation data, BofA analysts say.</li><li>The analyst predicted that an upside surprise to September CPI would stoke fresh volatility. </li></ul>The September jobs report was good news, but it gives investors more reason to brace for the next inflation reading, Bank of America analysts say.The analysts say last week's blockbuster jobs report puts more pressure on this week's consumer price index data, with a big surprise to the upside now more likely to usher in a wave of market volatility. They say the CPI reading, due Thursday, is "no longer a 'non-event.'""Following the blowout jobs report last Friday, we believe the importance of CPI this week has risen," the analysts said in a Sunday note. "A sizeable surprise could bring uncertainty on the easing cycle and more volatility into the market."They note that options are pricing in a 109 basis point move, or a little over 1%, in the S&amp;P 500 on Thursday when CPI is released, compared to forecasts of a 91 basis point move last week. That would surpass the three-month average of a 70 basis point move on the day of a CPI release, and a move of that size would be the largest swing tied to a CPI report since May.On the bright side, the analysts say that stocks can withstand a slight upside surprise if it is tied to strong macro data. "Good news is good news for stocks as long as inflation doesn't flare up again," the analysts said, adding that historically, stocks and rates have moved higher when inflation moves lower, and lower when inflation follows an upward trajectory.Economists forecast the CPI report will show inflation continued to cool last month, rising 2.3% year-over-year compared to 2.5% in August.As inflation has edged back toward the Fed's 2% target, the central bank has grown increasingly focused on the labor market after years of fighting inflation. That <a target="_blank" href="https://www.businessinsider.com/fed-rate-cut-explained-inflation-labor-market-conditions-outlook-recession-2024-9">pivot</a> was behind the central bank's decision to deliver a jumbo 50 basis point rate cut last month, the first cut in four years. However, with the blockbuster September jobs report, some economists say <a target="_blank" href="https://www.businessinsider.com/inflation-outlook-fed-interest-rate-cuts-jobs-report-us-economy-2024-10">inflation is still a concern.</a> If this week's CPI data surprises to the upside, the Fed could be forced to turn its attention back toward pricing pressures in the economy. "CPI for September will be a key data release. If prices rise faster than expected on top of the stronger labor data, chances for the Fed to skip the November meeting will increase," UBS economist Brian Rose said in a Friday note.The odds of a 50 basis point rate cut from the Fed next month <a target="_blank" href="https://www.businessinsider.com/september-jobs-report-fed-rate-cut-outlook-november-labor-market-2024-10">slipped</a> from 33% to zero following the release of the September jobs report, according to the <a target="_blank" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html">CME FedWatch tool</a>. Thursday's CPI reading will thus be a key indicator as investors anticipate the Fed's next move.The <a target="_blank" href="https://www.businessinsider.com/september-jobs-report-unemployment-rate-nonfarm-payroll-growth-federal-reserve-2024-10">September jobs report</a> blew past forecasts, with 254,000 nonfarm payrolls added compared to expectations of 150,000. The unemployment rate dipped from 4.2% to 4.1%.

Brace for stock-market volatility this week if inflation comes in hot after the September jobs report, BofA says

<ul class="summary-list"><li>Bitcoin spot ETFs saw a record $579.5 million in daily outflows on Monday.</li><li>The outflows come as traders prep for volatility amid election uncertainty following the vote. </li></ul>Investors pulled a record amount from bitcoin exchange-traded funds to start the week as they prepared for volatility in the world's largest crypto amid potential election uncertainty. Bloomberg data shows that the 12 spot bitcoin ETFs in the market lost $579.5 million on Monday. That's a record daily outflow for the funds since they first came to market in January. Bitcoin has been volatile in the week leading up to the vote, edging toward all-time highs last week before pulling back again below $70,000. On Tuesday, the token was up by about 1.5%, trading at $69,553. Vice President Kamala Harris and former President Donald Trump <a target="_blank" href="https://www.businessinsider.com/kamala-harris-donald-trump-swing-state-polls-photo-finish-2024-11">remain virtually tied</a> in the final polls. Prediction markets, meanwhile, show Trump with a sizable lead, though betting odds have also swung toward Harris in recent days. The uncertainty will likely stoke <a target="_blank" href="https://www.businessinsider.com/us-market-outlook-trump-harris-presidency-election-economy-analysts-strategy-2024-11?utm_source=Iterable&amp;utm_medium=email&amp;utm_campaign=campaign_Insider%20Today%20%E2%80%94%20November%205,%202024">market volatility</a>, experts say."We expect Monday and Tuesday to be quiet for markets, however, once we get the first drip feed of results on Tuesday night and Wednesday morning, expect fireworks," Kathleen Brooks, research director at XTB, said in a note.Other analysts also said they expect uncertainty to rattle markets, especially if votes have to be recounted in key states. "The election looks significantly more of a contest than many had been expecting, which could provide a more protracted and volatile period ahead as we see potential recounts and challenges to potentially drag out this process," Scope Markets' Joshua Mahony said in a note.Outcomes in swing states could be early indicators of a Trump or Harris victory, though. Troy Ludtka, Senior US Economist at SMBC, says a Trump win in key swing states like Georgia, North Carolina, and Pennsylvania could deliver an election outcome by midnight, or at least provide an early indication of who will win.The crypto industry's volatility comes as both candidates have targeted crypto voters.Trump has been vocal about his support for the industry this year, billing himself as the <a target="_blank" href="https://www.businessinsider.com/donald-trump-going-for-crypto-bro-vote-world-liberty-financial-2024-9?utm_medium=ingest&amp;utm_source=markets">"crypto president."</a> Harris has also courted crypto voters, marking a shift from President Joe Biden's administration, which has pursued a stringent regulatory agenda led by the Securities and Exchange Commission.

Bitcoin ETFs see highest daily outflows ever as traders brace for Election Day volatility

<ul class="summary-list"><li>Stock market "choppiness" will likely continue until the election, Ed Yardeni says.</li><li>Yardeni says gridlock is the best-case scenario for the market to resume record highs.</li></ul>Market "choppiness" will likely continue until the elections before stocks can resume their climb to record highs, Ed Yardeni says."We're seeing quite a bit of choppiness going on in the market here. I think it may continue until the elections, and then I think we'll resume to new record highs," Yardeni said in a Wednesday interview with CNBC.In early August, the S&amp;P 500 lost 3%, its biggest daily drop since 2022, in a <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/nasdaq-crash-tech-recession-global-stock-market-rout-accelerates-japan-2024-8">historic market rout</a>.The volatility resumed this week, with indexes on Tuesday notching their <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/stock-market-today-sell-off-nvidia-stock-price-doj-antitrust-2024-9">worst losses since the August sell-off</a> as Nvidia shares tumbled and weak manufacturing data sparked new fears about an economic slowdown. Yardeni says the market's return to record highs is partially dependent on the election's outcome, and that a gridlock outcome is the best-case scenario for the market."If we get a sweep of the Democrats or a sweep of the Republicans, I don't think the market is going to look forward to those kinds of regime," Yardeni said. "I think the market much more prefers gridlock."Gridlock in the capitol often results in sluggish legislative action, which markets prefer as it creates less uncertainty and fewer regulatory surprises to deal with. According to data from LPL Financial, the S&amp;P 500 has historically climbed during a split or Republican-controlled Congress and Democratic president."I think gridlock will win," Yardeni said."If that's the case, then I think the market will move higher, simply because the economy is doing fine notwithstanding the tightening of monetary policy over the past couple of years, all the geopolitical and domestic political stress. But all in all, the economy is doing fine," he added.

The stock market will be volatile until the election before resuming its rally to record highs, market vet Ed Yardeni says

<ul class="summary-list"><li>Higher valuations, a mixed macro outlook, and policy uncertainty raise the risk of further declines for stocks. </li><li>Yet, odds of a bear market are low amid a strong private sector and coming rate cuts, Goldman Sachs says.</li></ul>Macro and policy uncertainty have raised warning signs for further volatility for stocks in recent weeks, but the risk of a steeper correction into bear market territory looks remote, Goldman Sachs analysts said. According to the bank, there's an elevated risk that investors pullback amid lofty valuations, a mixed macro outlook, and policy uncertainty.While those factors may spark volatility and eat into returns in the coming months, there isn't much reason to believe a 20% drop from recent highs is in the cards. "We believe risk-adjusted returns for equities are likely to be lower into year-end. However, we think the risk of a bear market remains low with relatively low recession risk, helped by a healthy private sector and central bank easing," the analysts said in a Tuesday note.They note that drawdown risks have risen to around 20%, which is still relatively low. History shows a risk above 30% would be a "clear warning signal," according to the analysts."We are mildly pro-risk" going into the next 12 months, the analysts said.They also noted that bear markets, characterized by drawdowns of over 20% from recent highs, have become increasingly less common since the 1990s, with longer business cycles and lower macro volatility, plus greater policy "buffering" from central banks.The firm's outlook comes as indexes have been rattled in recent months by volatility stemming from weaker-than-expected macro data. A steep sell-off in early August after the July jobs report was followed this month by the S&amp;P 500's <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/stock-market-today-worst-week-august-jobs-report-recession-fears-2024-9">worst week in over a year</a> as a slight miss in the August employment report sparked fresh growth fears. Investors widely expect interest rate cuts to begin at next week's Fed policy meeting. Most expect the central bank to deliver a 25 basis point cut, according to <a target="_blank" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html">CME's FedWatch tool</a>, with markets eyeing 100 basis points of cuts by the end of the year.

No bear market for stocks in sight even as macro and policy uncertainty threaten further volatility, Goldman Sachs says

<ul class="summary-list"><li>Market volatility will stay elevated for years to come, Bank of America says.</li><li>The firm recommends avoiding the urge to buy the ongoing dip in tech stocks.</li></ul>The market is getting more volatile, and stocks will stay choppy for years ahead, according to Bank of America.The firm says that in the near term, election-related policy uncertainty will keep the market swinging. Looking further out through the end of 2027, the yield curve is signaling more volatility ahead, as shown by the chart below:<div type="image" title="The yield curve suggests higher VIX for years" height="421" width="658" msid="113204422" hostid="261" sizebytes="29464"></div>Further, a proprietary BofA "regime indicator" has swung into downturn territory.With those elements in play, the firm is recommending defensive stocks that generally outperform in times of uncertainty or weakness."Quality, stability and income have protected investors in prior volatile markets. We recalibrate our sector calls to augment these characteristics," analysts wrote on Monday.On the flip side, investors should avoid boosting exposure to the popular tech sector, the bank warned.Even if price swings help cheapen mega-cap industry names, several qualities still make this cohort an unfavorable investment, the bank said."Don't buy the tech dip," analysts said. "We remain underweight Information Technology despite arguments that it has gotten so beaten up."The bank cited record highs in the sector's enterprise-value-to-sales ratio, a signal that these firms remain overvalued. Meanwhile, tech funds could soon face passive selling pressure as the <a target="_blank" href="https://markets.businessinsider.com/index/s&amp;p_500?utm_source=markets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest&amp;utm_medium=ingest&amp;utm_source=markets&amp;utm_medium=ingest&amp;utm_source=markets">S&amp;P 500</a> prepares new index-cap rules.Specifically, the index is planning to lower the weightings of <a target="_blank" href="https://www.bloomberg.com/news/articles/2024-09-06/funds-with-350-billion-are-exposed-to-s-p-s-new-index-cap-rules">stock funds with $350 billion in assets</a>, Bloomberg reported. In this event, passive investment vehicles would have to restructure their holdings at the upcoming quarterly rebalance.As volatility picks up for the long term, quality and income should play a larger role in portfolios, analysts wrote.Although growth stocks made sense when borrowing costs were low through the 2010s, this is changing — in the next years, the bank expects single-digit returns.Quality exposure also makes sense in the more immediate term, according to Savita Subramanian, BofA's head of US equity and quant strategy."Don't be a hero," she told <a target="_blank" href="https://www.youtube.com/watch?v=RfF_CBrvjVU">CNBC on Friday</a>. "Just to park in safe total return type vehicles where you get paid to wait."In a note last week, Subramanian noted that today's quality stocks are not expensive, and those rated B+ or better are trading at a slight premium to their lower-quality peers.Meanwhile, utilities and real estate dividends should attract investor attention as Federal Reserve interest-rate cuts leave them hunting for yield opportunities. "Real Estate dividends are likely more sustainable than during prior cycles, given that since 2008, the sector has doubled its proportion of high quality ("B+ or Better") market cap to a whopping 70%," analysts wrote.

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Brace for stock-market volatility this week if inflation comes in hot after the September jobs report, BofA says

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Bitcoin ETFs see highest daily outflows ever as traders brace for Election Day volatility

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The stock market will be volatile until the election before resuming its rally to record highs, market vet Ed Yardeni says

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No bear market for stocks in sight even as macro and policy uncertainty threaten further volatility, Goldman Sachs says

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