Good morning, investors. The Fed surprised no one on Wednesday by holding rates steady, though the move does solidify that Jerome Powell’s final policy adjustment is now behind him.

He seems committed to not becoming a lame duck chairman, however, with nominee Kevin Warsh waiting in the wing.

Investors knew the Fed wouldn’t budge Wednesday but the stock market sold off anyway.

The context of the decision mattered more than the call itself.

The Fed is staring down an inflation problem that arguably preceded the Iran war but now an oil shock looks likely to make it worse, ultimately shrinking the path for rate cuts.

Jerome Powell acknowledged during his press conference that policymakers haven’t made as much progress on prices as they’d hoped.

While the updated dot plot still projects one rate cut in 2026, officials raised their core inflation forecast from 2.5% to 2.7%.

Plus, seven of 19 members do not expect any cuts at all this year, up from six at the December meeting.

Meanwhile, February producer prices came in at 0.7% month-over-month, more than double what economists expected and the sharpest jump since August 2023.

That data, notably, was logged before the Iran war began, which suggests the oil shock still hasn’t shown up in the government data yet.

Even Truflation — an alternative real-time inflation metric — shows its inflation gauge has more than doubled since the conflict began.

It’s climbed from 0.68% on February 8 to 1.52% as of this writing.

The bond market, too, is sending the same signal.

The 5-year breakeven inflation rate has climbed to 2.62%, while the 10-year hovers at 2.37%.

The widening spread suggests investors see near-term inflation pressures.

"Inflation was already too high for the Fed," Bob Elliott, CIO of Unlimited Funds, told me on Full Signal. "What this does is create a re-acceleration pressure. And given that circumstance, the Fed cannot cut when the possibility of 4% inflation is on the horizon."

The Fed sees little to celebrate in the broader macro outlook:

At least for equity investors, though, history continues to favor the bulls.

Over the last four decades, the S&P 500 has averaged a 24% return in the 12 months following an oil shock.

Still, rate cuts are moving further out into the horizon.

And while Powell won’t be the Fed Chair much longer, his successor will inherit the exact same set of headaches.

📊 PPI jumped 0.7% in February more than double what economists expected. The hot wholesale inflation reading marked the biggest monthly gain since August 2023. This came before any war-driven energy price increases, too. (Reuters)

🚀 Micron stock has climbed 62% this year. The memory provider has surged thanks to a shortage stemming from massive demand for Nvidia’s AI chips. Average selling prices for Micron’s products have surged 32% compared to last quarter. (CNBC)

🏘 Fannie and Freddie are adjusting their mortgage rules. In light of rising insurance costs, the two companies will now accept policies that only cover the current value of a roof, rather than its full replacement cost. (Yahoo Finance)

I sat down with Bob Elliott, CIO of Unlimited Funds, to discuss the rapidly-changing macro outlook, the Fed’s impossible task, portfolio positioning for 2026, and lessons from working alongside Ray Dalio for a decade.

Tune in on YouTube, Spotify, or Apple Podcasts.

🗓 March 19, 1992: AOL went public on Nasdaq at $11.50 a share with a market cap of $62 million. By 1999 the stock had risen more than 700-fold, turning a $100 investment into more than $28,000.

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