Inflation Is Soaring, and the Federal Reserve Could Do Something It Hasn't Done Since 2023. Here's What It Means for Stocks.

The Consumer Price Index (CPI), a measure of inflation, came in at an annualized rate of 3.8% in April, nearly twice the Federal Reserve's 2% target. To make matters worse, the Producer Price Index (PPI) increased even faster, suggesting there is more inflation on the business side that could be passed on to consumers in the coming months.

May 2023 was the last time the CPI was this high, and the Fed was raising the federal funds rate (overnight interest rate) to bring it under control. The S&P 500 index was in the throes of a bear market at the time, because rising interest rates are a significant headwind for corporate earnings.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

After six interest rate cuts since September 2024, Wall Street is now predicting the Fed's next move will be a hike. Could this derail the current bull market in stocks?

Rising oil prices are the key driver of inflation right now. Following an attack on its territory by the U.S. back in February, Iran closed the critical Strait of Hormuz waterway, through which 25% of the world's seaborne oil supply transits each day. This sparked fears of a global oil shortage and sent the price of West Texas Intermediate (WTI) crude soaring to around $120 per barrel, more than double its opening price at the start of 2026.

Fortunately, the U.S. and Iran have agreed to a ceasefire while they negotiate a long-term peace deal, so tensions have eased. But a barrel of WTI still trades at an elevated price of $89, because according to a report by the International Energy Agency, it could take several months for Middle Eastern oil producers to ramp production up to prewar levels.

That doesn't bode well for the inflation outlook, because oil prices influence the cost of every product that travels by truck, plane, or boat. Therefore, consumers are facing higher prices not only at the gas pump, but also at the grocery store and at the mall.

In fact, the PPI came in at an annualized rate of 6% in April, with the energy component soaring by 22.7%. If businesses continue passing those cost increases on to consumers, then April's CPI reading of 3.8% might be tame compared to what lies ahead in the next few months.