You can feel the shift in real time.
Markets expect the Fed to raise interest rates by the end of 2026, with a probability of almost 50%.
Just a few months ago, there were forecasts of up to four rate cuts this year.
So, what changed?
primary motivator here. With oil prices rising beyond $100 per barrel, inflationary pressures are returning quickly. Gas costs alone have risen roughly 50% in only four months, directly impacting CPI estimates.
Rates are responding accordingly. The US 10-year yield has risen by over 40 basis points since the Iran conflict began, and mortgage rates have already reached new 2026 highs.
not limited to the United States. The ECB is now likely to raise rates twice this year, bolstering the notion that global central banks are not done tightening.
If oil prices remain high for a few more months, the US CPI might rise to around 3.3%, making it difficult for the Fed to justify further easing.
What we are witnessing is a rapid narrative reversal.
In a matter of weeks, we went from "rate cuts are coming" to "higher for longer is back."
The key takeaway is not just macro, but placement.
Liquidity may not return as rapidly as predicted. Risk assets may experience pressure if yields continue to climb, particularly in the short term.
However, in the long run, situations like this tend to deepen the divide.
Hard and limited assets keep their worth better, whereas cash is undermined by inflation cycles.
The market is reflecting reality.
Adapt early, or you'll be left behind.
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