With both PPI and CPI coming in hot, I see risk continuing to rise. The Fed’s hands are now tied, and rate cuts appear to be completely off the table for the foreseeable future. Interest rates have already been moving higher, and if inflation remains sticky, the market could soon begin pricing in the possibility of rate hikes. While there are currently no clear signs of a meaningful economic slowdown, persistently higher rates could ultimately lead to an “engineered” recession. Mega-cap stocks continue to lead the market, with GOOGL and NVDA showing the strongest relative performance, while META remains the clear laggard among the group. At the same time, market breadth has been deteriorating and participation continues to narrow. Currently, only 40% of Nasdaq stocks are trading above their 200-day moving average, and just 46% of S&P 500 stocks are above their 50-day line. Be careful chasing extended stocks in this environment. This may be a good time to finance risk by taking partial profits in names that have already produced solid gains and that allows you to freeroll the rest of the trade risk free.