Markets Are Watching Inflation Expectations Surge—and It Might Just Be the Beginning

Each week, Strategic Analysis hosts a subscriber-only webinar covering timely market developments, investment strategy, and stock picks. The sessions are led by Ross Healy and dive into topics that matter to long-term investors—like inflation, interest rates, asset allocation, and sector trends.

This week’s recap focuses on the return of U.S. tariffs and a sharp rise in inflation expectations, with investors shifting back to income-generating and inflation-hedging plays. Below is a summary of the key takeaways from the session.
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Key Market Takeaways:

Tariffs Return, Inflation Flares
‍New U.S. tariffs are raising fears of retaliation and pushing inflation expectations higher—mirroring early 1970s conditions. Both 1-year and 5-year inflation expectations have jumped, shaking investor confidence.

“Transitory” Again?
‍Despite the data, Powell is once again calling inflation “transitory.” Sound familiar? The last time that happened, inflation stuck around a lot longer than expected.

Value Outperforming Growth
‍NASDAQ and S&P 500 are pulling back. Meanwhile, the TSX, with its heavier tilt toward value and dividends, is holding steady. The market is clearly rewarding stability.

Income as a Defensive Play
‍A focus on high-yield stocks is gaining steam. A fresh list of 10 Canadian and several U.S. income picks highlights names with strong fundamentals and above-average yields—averaging 6.5%.

Echoes of the 1970s
‍The setup today resembles the inflation cycles of the past. These trends don’t turn overnight—expect a longer, potentially more volatile path ahead.

The Debt Spiral Watch
‍With the U.S. deficit ballooning, debt sustainability is again a concern. The risk? Falling into a long-term debt trap that’s hard to escape.

Gold & Commodities on Deck
‍Gold allocations remain low despite inflation risk. If oil and other commodities push higher, we could see renewed momentum in hard assets.

Outlook

• Inflation risk is back and it’s not just short-term noise
• Income and value stocks are outperforming growth
• Portfolios may need to pivot toward protection and predictability
  

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