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📊 Inflation Watch: Will higher energy prices slow the disinflation trend?

This week's US CPI release could become one of the most important macro events of the month.

After April inflation came in at 4.0% year-on-year, markets are now watching closely to see whether higher energy prices and recent geopolitical developments are beginning to feed back into broader price pressures.

The longer-term trend remains encouraging. Both consumer and producer inflation have fallen significantly from their 2022 peaks, reflecting the impact of tighter monetary policy and easing supply-chain pressures.

However, the latest charts also show that progress has become less linear. Monthly inflation readings have started to firm again, while producer prices have been trending higher in recent months.

For investors, the key question is no longer whether inflation is falling, but how quickly it can return toward the Fed's target.

A stronger-than-expected CPI print could reinforce the "higher-for-longer" interest-rate narrative and support Treasury yields and the US dollar.
A softer reading, on the other hand, would strengthen expectations that inflation continues to move gradually in the right direction.

All eyes now turn to Wednesday's CPI release.

📊 Chart of the Week: Higher Yields, Higher Stocks - What's Changed?

The S&P 500 continues to push toward new highs even as Treasury yields remain elevated and the yield curve stays positively sloped.

Not long ago, rising yields would have been seen as a warning sign for equities.

Strong corporate earnings, resilient economic data, and continued enthusiasm around AI have helped investors look through higher borrowing costs and delayed expectations for Fed rate cuts.

The positive 10Y–2Y spread suggests the bond market is no longer flashing the recession signals that dominated previous years. Instead, investors seem increasingly comfortable with a "higher-for-longer" interest rate environment.

The result? Stocks are focusing on growth, while bonds remain focused on inflation.

The key question:

Can equities continue making new highs if bond yields remain elevated, or will higher rates eventually become a stronger headwind for risk assets?

📊 Chart of the Week: Higher oil, higher yields - Is the Inflation trade back?

Oil prices have been rising again, and US bond yields are moving higher at the same time.

This matters because higher oil prices can keep inflation pressure alive. When inflation risks rise, markets start to question whether the Fed can cut rates as soon or as much as previously expected.

The chart shows this clearly: as Brent oil climbed, US 10-year and 30-year yields also moved higher.

For investors, the message is simple:

Higher energy prices are not just a commodity story. They can quickly become an inflation, interest rate, and equity market story.

The key question now:

If oil stays high, will markets need to rethink the path for inflation and interest rates?

When Oil and Stocks Rise Together… What Does It Mean?

Rising oil prices are typically seen as a headwind for equities. But when both oil and stock markets move higher at the same time, the message becomes more complex.
Markets are not pricing in a demand shock, but rather a combination of resilient growth and supply-driven pressures. In this environment, equities remain supported by earnings strength and improving sentiment, while oil reflects ongoing geopolitical risks and tighter supply conditions.

Over the past two weeks, Brent crude rebounded from $90 to above $100, while the S&P 500 climbed from around 6,800 to new highs above 7,100.

At what point do higher energy prices begin to challenge growth and can equities continue to look through it?

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