On Thursday, the latest Consumer Price Index report for December will be released. Interactive Brokers Chief Strategist Steve Sosnick thinks there is an asymmetric risk to the report for investors.

Sosnick tells Yahoo Finance Live that good news on inflation is already priced in. However, he doesn't think that "an upside surprise in inflation is priced in right now." "In terms of being prepared for what to expect, I think the risks are a little asymmetric going into tomorrow's number," Sosnick says. Watch the video above to find out what the report could mean for the Federal Reserve's next rate decision.

Click here to watch the full interview on the Yahoo Finance YouTube page or you can watch this full episode of Yahoo Finance Live here.

Editor's note: This article was written by Stephanie Mikulich

Video Transcript

SEANA SMITH: The rally that we have seen in equities may be overshot. Now, that's according to a new note out from HSBC, the analysts there forecasting a temporary pause in the recent rally, warning that valuations look vulnerable to any upside surprises that we could see in inflation.

Remember, we'll get that CPI print tomorrow morning. So is the risk reward set-up looking a bit less attractive? We want to bring in Steve Sosnick. He's Interactive Brokers Chief Strategist, here to break that down and much more.

Steve, let's start with that valuation call, maybe the brief pullback that we've seen in the markets since the start of the year in terms of what we'll get tomorrow from the inflation number. Do you think valuations-- if we see any sort of upside surprise, how do you expect the market to react?

STEVE SOSNICK: It's as though he and I wrote the same note about the same time because that's pretty much in the notes that I sent over to you guys. You know, I feel that tomorrow's CPI number is a bit of an asymmetric risk. I think a good number or even a better than expected number is largely priced in.

Think of the move we had. You know, I called it weaponized FOMO into the last two months of the year of just that rally we had. And there's a lot of good news priced in. I don't think that an upside surprise in inflation is priced in right now. I don't have a crystal ball as to what to expect but in terms of being prepared for what to expect. I think the risks are a little asymmetric going into tomorrow's number.

BRAD SMITH: Does tomorrow's number even move the dial for the Fed? Do you think they see the print and say, oh, this entirely changes the tenor at our next meeting?

STEVE SOSNICK: No. I think unless-- I think unless the number is way out of line. But let's talk about it. I like to look at the monthly numbers because the yearly numbers have 11 months of data we already know as opposed to the one month we don't. So let's focus on the one month we don't.

The core is supposed to go-- is expected to go up by 0.3. Well, that annualizes out to, you know, 3.6%. If you do a three-month annualized number, it's a little bit lower. It's about 3.2%, which a lot of people like to do.

But that's still above 2. It's the right direction. It's a good thing for us. But it doesn't necessarily move the needle in a huge way. I think the Fed wants to see sustained 2% inflation, not just a blip here and there. And so unless it's really way out of line in either direction, I think plus or minus 0.1 here or there is not gonna be a huge determinant