On Wednesday, August 13 at 8:30 AM Central European Time, the markets will hold their breath. US inflation data for July will be released — and this single number decides the next weeks in the markets.
The consensus expectation is 3.4 percent annual inflation. Sounds technical. But behind it lies a simple question: Will interest rates fall soon? If inflation drops, the Federal Reserve can cut rates. Lower rates mean cheaper credit — that's good for stocks.
Why this number matters today
For weeks, markets have oscillated between euphoria and panic. In June, inflation stood at 4.2 percent. In July, it dropped to 3.5 percent. If it now falls further to 3.4 percent, professionals see this as a signal: The Fed might cut rates in the fall.
The problem: If inflation does NOT fall — or even rises —, fear returns. Higher rates for longer. That pressures stock prices.
This morning, DAX futures show a slight gain of 0.69 percent. The S&P 500 hovers near the flatline. Markets are waiting.
What this means for your money
Imagine you have 10,000 euros in a global ETF like the MSCI All-World. If inflation falls and markets rise, you could see a gain of 3-5 percent in the coming weeks — that's 300 to 500 euros.
But if inflation comes in higher than expected, analysts expect a drop of similar magnitude. Then you lose the same amount on paper. That's why Wednesday at 8:30 AM matters to anyone with money in the markets.
I remember the year 2000, when I bought Deutsche Telekom at nearly one hundred euros. Back then, I didn't understand how strongly such economic data can move prices. Today I know: Patience beats panic. But you need to understand what's happening.
How professionals are reacting now
Hedge funds and institutional investors are already positioning. In the last 48 hours, options worth over 800 million dollars betting on falling prices have been purchased — insurance against bad news.
At the same time, others are massively buying tech stocks. Why? Because lower rates especially help tech companies. They often carry high debt and profit from cheaper credit.
This is called "positioning" — the big players bet on both scenarios simultaneously. They want to be on the right side no matter what number comes out.
What you can do now
If you're just starting: Panic is the biggest mistake. A single data point doesn't change the long-term direction of your portfolio.
My daughter Lena started her first ETF savings plan a month ago. I told her: "No matter what happens on Wednesday — you keep saving. In five years, you'll laugh about this one number."
If you're already invested: Review your portfolio. Do you still have cash as a buffer? Six months' salary should be secure before you even think about stocks. Then you can stay calm, even when prices drop.
And if the number comes out and markets fall? That's not a catastrophe. That's an opportunity. Those who think long-term buy when others sell.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Past performance is not an indicator of future results.