"Now we have another supply shock coming. Inflation came down sharply in 2023 and 2024, getting close to the Fed's 2% target by end of 2024. Then came the tariff shock, which turned out smaller than feared."
"With inflation running around 3%, and somewhere between 0.5 and 0.8 percentage points attributable to tariffs, the US had been pretty close to 2% all this time. Now Powell sees a third shock forming: an energy shock."
"SPY is down -7% year to date through March 30, 2026, and off -8% over the past month. The VIX tells the same story: the fear gauge sits at 30.61, up 54% over the past month."
"Core PCE, the Fed's preferred inflation gauge, reached 128.394 in January 2026 its highest reading in the 12-month dataset. Consumer confidence offers no cushion: the University of Michigan sentiment index registered 56.6 in February 2026, deep in pessimistic territory."
Jerome Powell indicates that markets face a new supply shock, specifically an energy shock, following a period of declining inflation. Inflation approached the Fed's 2% target by late 2024, aided by a smaller-than-expected tariff impact. However, with WTI crude oil prices exceeding $100, concerns about energy-driven inflation are rising. SPDR S&P 500 ETF Trust (SPY) has already seen a decline of 7% year-to-date, reflecting market pressures. The bond market is adjusting to persistent inflation, with rising Treasury yields compressing valuations, particularly in technology sectors.
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