Fed Capitulation Signals Need for Inflation-Resistant Portfolio

For the first time in a while, Fed officials have started sounding meaningfully dovish. While interest rates will continue to rise, the pace of hikes will soon slow. Against a weakening earnings backdrop and with inflation still high, stocks that are resistant to price pressures will benefit. That’s at least until the Fed realizes it declared “Mission Accomplished” too soon.

What a difference a few weeks make. Just three weeks ago, markets were in turmoil and a host of systemic financial risks were piling up. A softening of the Fed’s rate hike pace seemed likely. Last week we got confirmation. San Francisco Fed President Mary Daly said the Fed was considering smaller hikes. Peak hawkishness is finally here.