Investors Brace for CPI Report as SpaceX IPO Fuels Portfolio Repositioning: Insights From Melissa Otto

And welcome back.

Now US futures are pointing to a cautious open this morning as investors continue to balance economic data, earnings expectations, interest rates, uncertainty, and growing geopolitical risks.

And at the same time, the global markets are sending some mixed signals, leaving many investors.

Asking a simple question.

What is the market really pricing in right now?

So to talk about this and more, we have Melissa Otto, Head of Visible Alpha Research at S&P Global.

Melissa, thank you so much for being with us this morning.

I know it's early, so I really do appreciate you joining us.

No worries.

I had my coffee.

Thanks for having me on.

Oh, that's great.

I, I had my sparkling water, so that, that's as exciting as it's gonna get for me this morning.

But Melissa, let's get started with the big picture.

Now, CPI will be out within the next hour or so, and the markets will open soon.

So, what are futures telling us about investor sentiment and how does that inflation report that's gonna be coming out, how does that change the market's view on the Fed policy?

We have a lot of cross currents in the market this morning.

First of all, And and probably most importantly, there is a massive liquidity event about to happen, which is SpaceX, so as a result of that, Many investors are having to reallocate and prepare for that.

In addition, it's going into a couple of indices, so indices are repopulating and reallocating as well.

So I think, you know, when you're talking about $75 billion that's going to move the needle and create some level of volatility.

So that's 1st.

2nd, we have this conflict in the Middle East that is simply not slowing down.

And it, you know, we get all these mixed signals.

Oh, it's gonna, we're getting a a ceasefire, no, we're not, we are, we, we're not, you know, and I think That needs to be addressed, and the Strait of Hormuz needs to open, and I think we're gonna continue to see volatility around that.

And then the third issue um is around inflation.

Uh, I mean, as you pointed out, I mean, we are continuing to see inflationary pressures creep into the economy.

This is concerning.

It is, you know, I think moved interest rates toward an upward bias, which is, is not a good thing.

Um, uh, investors will be very concerned about that, and we'll be looking to see what that CPI data looks like this morning.

So, Melissa, I definitely wanna talk about SpaceX cause investors are juggling the economic data, the Fed expectations, corporate earnings.

So, which of those are carrying the most weight right now and how does the potential SpaceX IPO fit into this entire equation?

I mean, it's hard to quantify exactly, you know, which one is like the driving force, um.

What, um, what we see is that SpaceX is a, a very, very important transaction that's about to take place, and because of the way that it's structured, so there's allocations for retail that are significantly higher than the historic norms.

Historic norms are like usually Less than 10%.

This one is targeting around 30%, um.

There are, you know, chat, there's chatter that this is massively oversubscribed, uh, from institutional investors, um, and that, you know, I think when they, they didn't give a price range, they gave an actual price, and so that $135 let's, let's see where it goes, what happens, you know, I think what we saw from previous the previous Cheribis IPO that Jumped up almost 70% in its first day of trading, so let's see what SpaceX does, and, you know, I think having SpaceX2 in a couple of indices is forcing ETFs to recalibrate and all of that.

Liquidity movement is is gonna create volatility, cause they're gonna have to sell some positions, they're gonna have to reduce some positions, and and make space for uh something new that's gonna be quite sizable.

No, it's definitely gonna be quite sizable and it's something that everyone here on the floor is talking about.

But let's also get back to the geopolitical situation.

Let's talk about the Strait of Hormuz.

So if tensions escalate further, how could, uh, that actually immediately impact, uh, on equities like energy markets and investor, uh, investor risk appetite, and etc.

Risk off.

I mean, investors don't like when there's a lot of uncertainty, and it, it's going to probably bring people to the sidelines, as opposed to um wanting to be aggressive and um drive their animal spirits, and, and so I think, you know, that's that's gonna be one thing that It's gonna be an interesting um contrast to what's happening in the IPO market, you know, you've got this conflict that is potentially um maybe making people a little bit uncomfortable in terms of how they want to take risks.

Yeah, Melissa, well, it's definitely gonna be interesting to see what happens this week, especially at the end of the week.

Melissa, thank you so much for joining us.

I know it's early, so I definitely do appreciate your time.

It's, it's not that early.

I've done 5 a.m.

Thanks for having me.

It's awesome.

Well, thank you so much, Melissa.