What’s the market missing about inflation, the Fed, and oil price?

What's the market missing about inflation, the Fed, and oil prices? The answer might surprise you. Real yields have risen 33 basis points since the start of 2026—now approaching expansion highs. But here's the puzzle: oil prices collapsed yet yields stayed elevated. That tells you something else is driving this repricing. The US economy is outperforming badly. Capex doubled since January. Employment nearly tripled. Activity surprise index at 5-year highs. Sounds bullish for stocks, right? It's not. There's a paradox unfolding that most investors aren't seeing. When inflation stays elevated AND growth surprises to the upside, the Fed responds more aggressively. Not with cuts. With hikes. Higher real yields = compressed stock valuations. Period. We're in a "good news is bad news" regime where strong economic data is terrible for equities. The market is pricing for growth to continue without consequences. Assuming the Fed can stay dovish even with inflation above target and growth accelerating. That's not how it works. Capex is doubling because of business tax incentives and declining policy uncertainty—not just AI. Employment is surging. Inflation remains sticky. The Fed will hike again. Real yields have room to climb further. Either the AI bubble pops from commoditization risk (OpenAI delaying IPO, Chinese models catching up) OR yields keep rising until stocks break. Add Iran uncertainty on top—if the ceasefire collapses and war resumes, oil spikes, inflation pressure intensifies, and the Fed becomes even more aggressive. Something has to give soon. The question is: which breaks first? Bonds are coming for the AI trade. Whether through slower growth or rising yields, the outcome is the same: pressure on risk assets. Watch the full breakdown to understand the setup markets are completely missing.