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*                       FIEND'S SUPERBEAR MARKET REPORT                     *

*                                  May 13, 2026                             *

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*                       e-mail: fiendbear@fiendbear.com                     *

*                    web address: http://www.fiendbear.com                  *

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Fiend Commentary
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Inflation Is Back in the Driver’s Seat

Tuesday’s inflation report should have been a wake-up call. Instead, the stock market treated it more like a mild inconvenience.

April CPI rose 0.6% for the month and 3.8% year-over-year, the hottest annual reading since May 2023. Core CPI rose 0.4% for the month and 2.8% year-over-year. Energy was the obvious culprit, with the energy index up 17.9% over the past year and gasoline up 28.4%. That is not “mission accomplished.” That is inflation moving away from the Fed’s target, not toward it.

The market reaction was revealing. Stocks wobbled, especially tech, but there was no sense of real panic. The Dow even managed to finish slightly higher. Wall Street has become so conditioned to dismiss bad news that even a hot inflation report is treated as a speed bump, not a warning.

The bond market was less forgiving.

The 10-year Treasury yield moved toward 4.5%, and the 30-year pushed back above 5%. That is the important part. If stocks want to pretend inflation is manageable, the long bond is saying otherwise. A 5% handle on the 30-year is not just a number. It affects mortgages, corporate refinancing, long-term government financing, and equity valuations. When the long end starts pushing back, financial conditions tighten even if the Fed does nothing.

And right now, the Fed is increasingly boxed in.

Only a few months ago, investors were talking about multiple rate cuts. Now the market is pricing almost no chance of a cut in 2026, while the odds of a hike have moved close to 30% by year-end. That is a remarkable reversal. It tells you traders are beginning to understand that an oil-driven inflation shock is not easy to “look through” if it lasts long enough.

Oil remains the pressure point. Crude is still trading above $100, and the Strait situation remains unresolved. As long as energy stays elevated, inflation can keep filtering into transportation, food, shipping, utilities, and consumer psychology. The first month of high oil is a shock. The second month becomes a pattern. The third month becomes embedded.

That is why the market’s calm feels dangerous. Investors are still behaving as if every problem will eventually turn into a Fed rescue. But this is not the old clean setup where weak growth automatically means easier policy. If inflation is rising at the same time growth is uneven, the Fed has no easy move.

Cut rates, and the dollar/inflation problem could get worse.
Hold rates, and the economy may weaken further.
Hike rates, and risk assets could finally realize the liquidity blanket is gone.

For now, Wall Street is trying to ignore that tradeoff. The bond market is not.

The big question heading into the rest of the week is whether investors continue to shrug off inflation because stocks are near records, or whether the 5% long bond finally forces a broader rethink.

If yields keep rising while oil stays above $100, the market’s “everything is fine” story gets harder to sell by the day.                             

 

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