The figures represent a marked decline from inflation’s 40 year, 9.1% peak in June, but they were also exactly what Wall Street was expecting. And core inflation—which excludes volatile food and energy prices—was up 0.3% for the month and 5.7% year-over-year. 

Still, BMO Wealth Management’s chief investment strategist Yung-Yu Ma, told Fortune that it was “a very favorable report with inflation moderating in several areas.” And some experts argue that it signals the end of the bear market for stocks.

Gasoline prices sank 9.4% in December and were “by far the largest contributor” to the overall drop in inflation, according to the BLS. Used cars and trucks prices also sank 2.5% last month, and 8.8% year over year. And despite a return to travel this holiday season, airfares fell 3.1% in December. Food prices were up 10.4% year over year, but just 0.3% month over month—a slowdown from the 0.5% rise in November and the 1.1% jump in July.

Throughout 2022, Fed officials raised interest rates seven times in an effort to reduce inflation to their 2% target, hoping to avoid sparking a recession in the process. The central bank’s chairman, Jerome Powell, famously described his goal as a sort of “soft landing” for the economy. 

Ma argues that the latest report is a sign that Powell’s tactics are working, which could enable him to slow the pace of interest rate hikes moving forward. 

“This should soften the Fed’s tone at the next meeting, and it reinforces our belief in a soft landing in which inflation falls but the labor market remains healthy and the economy recalibrates to higher interest rates in the coming quarters,” he said.

But Ma noted that some components of the consumer price index remained high in December, including hospital services and car insurance, among others. And BlackRock’s chief investment officer of global fixed income, Rick Rieder, said in a Thursday note that the CPI report shows that inflation is “moderating,” but added a caveat:

“Deflating inflation is a bit like letting the air out of a balloon; the speed and shape can be hard to predict,” he wrote. “Today’s numbers show an inflationary condition, which while improving, is doing so in an uneven way and remains still distant (on a year-on-year basis) from the Federal Reserve’s target.”

The last gasps of the bear market—or is it all priced in?

With inflation falling sharply in the past few months, some experts argue the bear market—which saw the S&P 500 drop roughly 20% last year—could be coming to an end.

James Demmert, chief investment officer of Main Street Research, told Fortune that he believes the latest inflation data is “supportive of equity prices moving higher.” But Demmert also warned that markets could be volatile throughout the first quarter.

“We are in the final phase of the bear market—which sometimes can be the most painful phase,” he said. “This is usually the phase when corporate earnings results and guidance disappoint.”

Demmert argued that the focus for investors now will be on earnings and the bear market “may resolve itself this quarter.” It’s a common view on Wall Street that the bear market could be on its last legs despite declining earnings per share (EPS). But Mike Wilson, Morgan Stanley’s chief investment officer, warned this week about the potential for corporate EPS to decline in the first quarter and cause a 20% drop in stocks.

Demmert said he believes investors should “remain defensive, yet opportunistic.” 

“Depending on this earnings season, investors may have a great opportunity to buy great companies on weakness as the quarter and earnings season progresses,” he argued.

But some experts are advising caution. Chris Zaccarelli, chief investment officer of Independent Advisor Alliance, told Fortune that because December’s inflation report came in “exactly as forecast,” the slowdown could have been largely anticipated by investors and priced into markets.

“A lot of this news was already priced in,” he said, arguing that the real question for investors will be whether inflation drops all the way back to the Fed’s 2% target, or whether it gets stuck at a higher level. Zaccarelli believes that many market participants are betting that inflation will continue to drop at the moment, and the economy won’t fall into a recession.

“What keeps us up at night is whether a more negative outcome lies ahead,” he said, explaining that inflation could remain above 3% and a deeper recession is still possible.

And Jason Pride, chief investment officer of Private Wealth at Glenmede, told Fortune that the likelihood of a recession remains “elevated” and the Fed will need to keep their policies restrictive in order to ensure that they don’t repeat past mistakes and “the inflation scourge is squashed.”

“Investors should be careful not to overextrapolate these results and should temper their expectations for premature rate cuts from the Fed,” he warned. “Year-over-year core consumer inflation is still far from the Fed’s price stability goals, and the 1970s provide case in point as to the risks of claiming victory on inflation too early.”