Inflation risk just hit a 20-year high according to the FOMC Diffusion Index.
This isn't just another data point. When the Fed's own internal gauge shows inflation expectations spiking like this, it matters for positioning.
What it means:
- Rate cuts are probably off the table for longer than most expect
- Real yields stay elevated
- Growth stocks with distant cash flows stay under pressure
- Defensive sectors and commodities look more attractive
The market keeps pricing in rate cuts. The Fed keeps telling us inflation isn't done. One of these is wrong.
This isn't just another data point. When the Fed's own internal gauge shows inflation expectations spiking like this, it matters for positioning.
What it means:
- Rate cuts are probably off the table for longer than most expect
- Real yields stay elevated
- Growth stocks with distant cash flows stay under pressure
- Defensive sectors and commodities look more attractive
The market keeps pricing in rate cuts. The Fed keeps telling us inflation isn't done. One of these is wrong.