It’s hiking season again. And no, not just because it’s springtime.

For months, traders were betting that the Fed would keep rates steady amid the war in Iran and fears of stagflation. But now that pendulum has swung in the other direction: As of this morning, traders in the futures market believe there’s a 52% chance that the Federal Reserve will raise interest rates by the end of 2026—the first time the probability has crossed the 50% threshold.

The reason, of course, is spiking energy prices. While inflation is still well above the Fed’s 2% target, global benchmark crude oil prices just surpassed $110, putting even more inflationary pressure on the economy. That isn’t going to end anytime soon: Just yesterday, the Organization for Economic Cooperation and Development said it expects headline inflation in the US to rise from 2.6% last year to 4.2% through the end of this year.

There’s the stag, then the ’flation

We’re already seeing the downstream effects of higher energy prices, such as major retailers warning they may be forced to raise prices due to higher transportation costs. Meanwhile, the Bureau of Labor Statistics said yesterday that import prices jumped 1.3% in February—the metric’s largest monthly spike since March 2022, mostly due to rising fuel costs.

It’s not just inflation that remains a problem: the OECD expects economic growth to slow this year as well. And the final part of the stagflation puzzle—the labor market—remains locked in purgatory as job growth trickles while unemployment remains stable.

The Fed’s biggest question mark yet

The threat of stagflation puts central bank officials between a rock and a hard place. On one hand, if they raise rates, it could mitigate rising inflation, but cause the economy to slow so much we fall into a recession. If they keep rates steady for the next year, or even cut them, inflation could spiral out of control again, 2022-style.

Back in March, Fed officials reiterated their consensus of one rate cut this year. The next FOMC meeting is in April, and right now, traders are pricing in a 95% chance rates will be kept the same.

In a speech yesterday, FOMC Vice Chair Philip Jefferson noted that the current economic pressure “complicates, at least in the short term, the picture on both sides of our dual mandate.” That might be the understatement of the year.—LB

🟢 What’s up

• Brown-Forman rose another 5.79% as it entered merger talks with Pernod Ricard, while JPMorgan upgraded the stock to Neutral.
• Britain’s most valuable company AstraZeneca climbed 2.8% after its experimental lung disease drug met targets in two late-stage trials.
• Entergy gained 6.82% on a deal with Meta to support a hyperscale data center in Northeast Louisiana.
• Tripadvisor jumped 1.61% as Bank of America upgraded the stock to Buy, pointing to activist momentum and strategic optionality.
• Construction company Argan surged 37.91% on a fourth-quarter earnings and revenue beat, with guidance topping expectations.

What’s down

• Meta Platforms sank 4.02%, extending losses after losing two key court cases and announcing layoffs across multiple divisions this week.
• Carnival fell 4.31% despite strong earnings and record bookings, as unhedged fuel costs remain a key investor concern.
• Palo Alto Networks dropped 5.97%, CrowdStrike slid 5.87%, Datadog declined 7.9%, and SentinelOne fell 6.12% as Anthropic tested a new AI model with strong cybersecurity capabilities.
• Coinbase fell 7.06%, Strategy dropped 5.21%, and Robinhood declined 6.15% as bitcoin slid to a two-week low.
• Clear Secure declined 11.31% as the Senate moved to fund most of DHS, easing shutdown-driven travel disruptions.

Those shopping bags are getting lighter, and that’s weighing on high-end consumer discretionary companies. In fact, according to CNBC, the war in Iran has erased about $100 billion in market cap for luxury goods stocks.

A large chunk of the customer base for companies like LVMH, Burberry Group, Hermès, and Kering does its shopping in the Middle East, which made it the fastest-growing market for luxury goods in 2025. Spending sprees in cities like Dubai didn’t arrive a moment too soon, with much of the high-end discretionary market still reeling from a downturn in China’s economy over the last few years that had bullied bottom lines.

The onset of fighting in the region, however, has dampened customers’ appetite for glitz and glam, and stocks have suffered as a result. It doesn’t help that high-end consumers aren’t impervious to the pains of oil shocks. Big spenders who have a large part of their wealth wrapped up in markets are more sensitive to volatility than most, while aspirational customers who want to live a luxurious lifestyle but aren’t quite there yet may need to cut back on their spending.

Earlier this month, UBS analysts noted that “investor sentiment appears, in our view, the most bearish in years” for the luxury goods industry. They put a positive spin on it, pointing out that the recent selloff could provide investors with a buying opportunity at low valuations—but the longer the war in Iran lasts, the longer these high-end stocks will be selling at bargain-bin prices.—MR

The two biggest retailers in the world are going head to head, ramping up AI strategies in a race to capture the next wave of online shopping. For Amazon, that means $200 billion in capex to roll out AI tools like “Buy for Me”, alongside its shopping assistant Rufus. As for Walmart, it’s working with OpenAI and Google to embed shopping into platforms like ChatGPT and Gemini, while deploying its own chatbot named “Sparky.”

So, who’s going to develop the latest, cutting-edge AI tech before the competition?

Who cares—the real battleground is rural America.

The $1 trillion opportunity

While city folk might need deep pockets to afford their daily mocha chai lattes, rural consumers spend roughly $1 trillion annually, and account for 20% of all retail purchases, excluding cars and gas. They’re an underappreciated market, and both companies are racing to win those customers—with very different strategies.

Amazon is betting on speed, investing $4 billion into rural logistics. Rural customers were once forced to wait half a week or more for their Amazon deliveries to arrive—today, one in five rural and small-town households receive orders within 24 hours, and 62% do within 48 hours. The company also plans to scale to 200 rural delivery stations by year-end, up from 70 in 2023.

Walmart is leveraging proximity. With 4,600 US locations and 90% of Americans living within 10 miles of a store, it already has deep rural reach. Now, it is turning those stores into delivery hubs and pickup points, strengthening its e-commerce capabilities.

The market divide

While both are making big strides, the market is split: Amazon is down 13.64% YTD, while Walmart is up 10.3%.

Bulls argue Walmart can win more efficiently. Mizuho analyst David Bellinger says the company can leverage AI without spending billions to build it, instead “borrowing” hyperscaler capex through partnerships and integrating those technologies into its ecosystem.

Amazon’s pullback reflects investor concerns around its massive spending, but don’t discount it just yet: The stock is now cheaper than Walmart—a rare reversal—with its forward EV/EBITDA multiple at an 18-year low. Jefferies analyst Brent Thill calls it “mispriced,” maintaining a buy rating and seeing 46% upside from today’s price.

That’s driven by strong fundamentals: Amazon’s retail business has already matched Walmart in gross merchandise volume while growing faster (10.9% vs. 4.7% last year) and with higher margins (5.8% vs. 4.4%). It also maintains a dominant 40.4% share of the e-commerce market, compared to Walmart’s 10.6%.

So, while Walmart may look like the safer bet today, Amazon’s investments could pay off for shareholders. But for now, the race is far from over.—SY

• Isn’t it funny how Congress reached an agreement to fund the TSA just in time for their two-week vacation?
• Oh wait, nevermind.
• Oaktree Capital Management is meeting all redemption requests of its private credit fund, enabling investors to pull out 8.5% of net assets.
• Sony is raising the price of its PlayStation 5, citing the global economic backdrop and high memory chip prices.
• China has opened two investigations into US trade practices.
• President Trump just put his signature on the dollar—the first time a sitting president has done that.
• Kalshi has been given the green light to allow margin trading on its platform, opening the door to institutional users.

Monday: We’re entering that weird no-man’s-land that lies between earnings seasons, so the next two weeks the reports will be few and far between, and there’s no announcements of note to start the week. But there is plenty of Fedspeak this week, and we kick things off with the big guy himself, Chair Jerome Powell.

Tuesday: Earnings pick up a bit with reports from Nike, McCormick & Co., RH, PVH Corp., and FactSet. We’ll also get a look at consumer confidence for March, as well as the S&P Case-Shiller home price index. And the Fedspeak continues with Chicago Fed President Austan Goolsbee, Vice Chair for Supervision Michelle Bowman, and governor Michael Barr.

Wednesday: Earnings include Cal-Maine Foods, Conagra, and Lamb Weston. Fed governor Michael Barr makes another appearance, while St. Louis Fed President Alberto Musalem will also speak. And we’ll get a delayed look at February’s US retail sales.

Thursday: No earnings worth mentioning today, and all we’ve got for economic reports are the weekly initial jobless claims and the February US trade deficit.

Friday: No earnings today either, but that’s okay, since all eyes will be on the monthly US jobs report.