Wow! The Probability of an Interest Rate Hike in 2026 Has Soared Over the Past Week.

U.S. inflation rose to a three-year high of 4.2% in May, even as the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite recently hit new highs. The hotter inflation print is likely to reinforce a more hawkish policy backdrop and support higher-for-longer rate expectations. That combination is a headwind for duration-sensitive assets and could pressure rate-sensitive sectors.

Analysis

U.S. inflation rose to a three-year high of 4.2% in May, even as the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite recently hit new highs. The hotter inflation print is likely to reinforce a more hawkish policy backdrop and support higher-for-longer rate expectations. That combination is a headwind for duration-sensitive assets and could pressure rate-sensitive sectors.