Inflation's comeback tour

We’ve been bumping Beyonce’s Renaissance and reliving the drama of Will Smith’s Oscars slap. Why? Because it feels like 2022 all over again.

The producer price index jumped a seasonally adjusted 1.4% over the month, more than double expectations of 0.5% and far higher than the 0.7% increase in March, making it the hottest monthly PPI reading since 2022.

The main culprit, of course, was energy prices, which have spiked since the oil shock tied to the Iran war. Roughly three quarters of the increase was due to a 7.8% jump in final demand energy, according to the BLS.

If you weren’t already convinced that inflation is making a comeback, yesterday we got the news that the consumer price index increased 3.8% annually last month, the highest reading since May 2023.

Back to bonds

Consumers aren’t the only ones stressed about rising prices—the suits down on the Street are spooked, too. But analysts are more worried about the bond market than they are about affording a full tank of gas.

When inflation accelerates, the chances that the Federal Reserve cuts interest rates decrease, which causes investors to bail on US Treasury bonds. When bond prices fall, Treasury yields spike:

• The 10-year US Treasury note yield rose to 4.49% today, its highest level since July 2025, though it closed at 4.481%.
• Meanwhile, the 2-year Treasury note yield fell to 3.983% at the end of the day, lower than the intra-day high of 4.015%.
• The longer-dated 30-year Treasury yield rose to 5.042%, down a bit from earlier in the day when it hit 5.05%, which was its highest level since last July.

“We see rising risks that the core PCE will settle in the 2.5-3% range even after tariff effects roll off,” explained Bank of America economists. “This would preclude additional rate cuts. We remain comfortable with our view that the Fed will be on hold until the second half of 2027.”

That’s a big problem for everyone on Wall Street. Rate cuts are a shot in the arm for businesses, since they lower borrowing costs and boost the economy overall—but higher-for-longer interest rates are a headwind for stocks, particularly growth stocks like those found in the tech sector.

What does this mean for investors?

High-flying growth stocks have driven much of the S&P 500’s recent gains, but this new market landscape is pushing some investors to consider boring, stable choices instead.

Take the understated I bond, a US government-backed security that protects against inflation. The yields on these bad boys rests at 4.26%, which ain’t too shabby for a relatively low-risk investment option. According to Morningstar, another alternative is inflation-protected bond funds, such as the Schwab US TIPS ETF.

Whatever you choose to do with your portfolio, keep an eye on bond yields.—LB