Stock market faces inflation test Wednesday: Here are ‘good, bad and ugly’ scenarios

Expectation for U.S. inflation have fallen over the past month thanks largely to the drop in industrial and agricultural commodity prices. This trend has shown up in the Federal Reserve Bank of New York’s Survey of Consumer Expectations, which saw expectations for inflation both three years and five years from now both decline in June.

It has also shown up in popular market-based indicators, like the five-year five-year forward inflation expectation rate, a popular gauge of long-term inflation expectations. Last week, the…