Elevated Diesel Prices Keep Pressure on Fed and Markets

The Federal Reserve’s unanimous decision to maintain high interest rates reflects a united front against persistent inflation, signaling that further hikes remain likely. Joe Quinlan, head of market strategy at Merrill and Bank of America Private Bank, observes that while the stock market remains resilient due to a robust economy expanding at 8% in nominal terms, specific sectors face significant strain. The housing market is particularly vulnerable as 30-year mortgage rates approach 7%, while surging diesel prices have replaced labor shortages as the primary concern for manufacturers and transporters. Despite anxiety surrounding AI's long-term profitability and regulatory challenges from Chinese competition, investors continue to buy technology dips, betting on future productivity gains. Ultimately, the U.S. economy’s "exceptionalism" allows it to absorb these shocks, but the Fed is unlikely to pivot toward rate cuts until energy-driven inflationary pressures subside.