Not investment advice.
We are going to get a tightening in monetary policy, which is bad for assets. Inflation, as shown below, is around 4% in the US and 3% in Europe and is going higher due to the war in Iran and the resulting higher energy prices. It is increasingly clear that whatever resolution comes in Iran will take a long time, so oil prices remain elevated.
Tightening is generally bad for assets. Below I show the S&P index alongside the Fed Funds rate in 2022. Stocks fell around 15% the last time this happened.
Tech stocks may well correct but will go back up because we are in a productivity boom and
a) prices are rising at the same time as earnings, so stocks aren’t yet that expensive,
b) U.S. households keep buying, and
c) some managers are short indexes and get squeezed, so they buy to cover, driving prices up.
Bonds go down, however, because:
a) nominal growth is around 7 percent while bond yields are well below 5 percent,
b) households don’t buy as many bonds as they do stocks,
c) the government is running a big budget deficit,
d) the tariffs were judged illegal and the government now needs to refund the revenue it collected,
e) the US is in a war with tactical victory but strategic defeat, which requires yet more money,
f) the new Fed chief is probably reluctant to hike rates, boosting the risk premium on longer-dated bonds amid an increasing lack of confidence in US institutions (like what happened to UK bonds), and
g) capex booms require debt.
Currencies in the short term will be driven by oil and the Fed. Elevated oil prices are bad for the euro and yen but good for Brazil and Norway; a Fed tightening shifts the pressure to more dollar bullish. Tightening is generally bearish for precious metals like gold, silver, and copper. European central banks are already discounted to tighten, but in 2026 the Fed is not.
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The tightening logic is clean and the bond case is especially sharp — point (f) about the new Fed chief's reluctance creating a risk premium on duration is the kind of thing most macro commentary skips over.
One layer I'd add on the "resolution will take a long time" point, since it feeds directly into the inflation trajectory you're mapping.
The physical constraints on Hormuz normalization aren't vague — they're sequential and measurable. Mine clearance takes 6+ months, and Iran laid a second round of mines in April so the clock keeps resetting. After clearance, insurance reclassification operates on quarterly committee cycles at the P&I clubs — zero of twelve have reclassified and the process can't be politically accelerated. Stack those timelines and you're looking at 8-10 months minimum from the day the last mine is cleared. Not from today.
That timeline changes the inflation math. The oil price input into your inflation chart isn't a temporary spike that fades with a ceasefire — it's a sustained elevated input with a specific minimum duration. And the transmission isn't instant. Fuel costs hit in 1-2 weeks but freight repricing takes 4-8 weeks, industrial input costs follow at 4-12 weeks, and agricultural pass-through runs 12-26 weeks behind that.
Which means even if oil peaked today, the inflation waves you're flagging have multiple stages still in the pipeline that haven't arrived yet. The tightening case isn't just about current inflation — it's about the inflation that's already locked in but hasn't shown up in the data.
That makes your duration call on bonds even stronger than your analysis suggests.