3<\/sup><\/em><\/a><\/u><\/strong><\/p>\n\n\n\nBond yields can rise from a number of factors, but this in case we think the market may be starting to price a longer tail to the energy shock. Since higher oil prices can feed into transportation, production, and consumer costs, bond investors tend to react quickly when energy shocks raise the risk of another inflation flare-up.But it is important to distinguish between short-term inflation pressure and a broad, lasting inflation cycle. Higher energy prices can certainly pinch consumers and businesses, but they do not automatically create persistent economy-wide inflation. For that to happen, businesses generally need enough pricing power to pass higher costs through broadly and repeatedly. Today, broad money supply growth has returned closer to pre-pandemic norms, which suggests the current environment is different from the post-Covid inflation surge.<\/p>\n\n\n\n
AI\u2019s Power Demand Is Becoming a Grid Story<\/strong> \u2013 U.S. data center power demand is projected to rise from 31 gigawatts in 2025 to 41 gigawatts in 2026, then to 66 gigawatts in 2027. Put differently, power demand from data centers could more than double in just two years, driven largely by the rapid buildout of AI computing capacity. The construction pipeline is significant. Planned additions are especially large in the Mid-Atlantic, Texas, and Mid-Continent power markets, but grid readiness varies widely by region. The Mid-Atlantic, Mid-Continent, and Northwest markets face elevated reliability risks because planned generation capacity may not be enough to meet rising data center demand. Texas and Georgia appear better positioned, with more new power generation capacity in the pipeline. For investors, the takeaway is that AI\u2019s impact is extending well beyond software and semiconductors. The buildout is creating new demand across utilities, power generation, grid equipment, construction, and energy infrastructure. AI demand may be powerful, but data centers still need permits, power, labor, equipment, and grid access. In our view, that makes the next phase of the AI story less about whether demand exists, and more about whether the physical infrastructure can keep up.4<\/sup><\/p>\n\n\n\nFed Minutes Show More Openness to Rate Hikes \u2013 <\/strong>For much of the past two years, the Federal Reserve\u2019s debate centered on when to cut interest rates. That conversation appears to be changing. Minutes from the Fed\u2019s April policy meeting showed that a majority of officials believed \u201csome policy firming\u201d could become appropriate if inflation continued to run persistently above the central bank\u2019s 2% target. The Fed ultimately voted to hold rates steady, but the minutes showed growing discomfort with language, suggesting the next move was still more likely to be a cut than a hike. Markets have taken note. Interest-rate futures recently priced the probability of at least one quarter-point rate increase by year-end at nearly 50%, a sharp shift from earlier expectations that cuts were the more likely next move. But there is another side to the argument. Treasury Secretary Scott Bessent has maintained that underlying inflation was declining before the Iran conflict and could resume that pattern after one or two more months of higher prices. If that proves right, incoming Fed Chair Kevin Warsh may inherit a challenging but manageable situation: near-term energy-driven inflation, but not necessarily a lasting inflation cycle, as we cited above.5<\/sup><\/p>\n\n\n\nPrepare Your Retirement for the Unexpected \u2013 <\/strong>Market volatility, inflation, and unexpected life events can quickly disrupt even the best retirement plans.<\/p>\n\n\n\nI recommend taking a look at our free Crisis-Proof Retirement Guide6<\/sup><\/a><\/u><\/em><\/strong> from Zacks tax experts, which outlines strategies designed to help investors withstand uncertainty. Inside includes:<\/p>\n\n\n\n\n- How to diversify across time, tax treatment, and income sources<\/li>\n\n\n\n
- Which overlooked risks pose the greatest threat to long-term security<\/li>\n\n\n\n
- How to build flexibility into your withdrawal and investment approach<\/li>\n\n\n\n
- Why annual reviews are essential for staying on course<\/li>\n\n\n\n
- How a research-driven advisor can help reinforce durability<\/li>\n\n\n\n
- And more\u2026<\/li>\n<\/ul>\n\n\n\n
If you have $500,000+ to invest, download our free guide to discover strategies and help protect your retirement against market shocks and life\u2019s unexpected events.<\/p>\n","protected":false},"excerpt":{"rendered":"
Global bond yields rise with the 10-year Treasurys bond crossing 4.5%, AI story becoming less about demand and more about capacity, Fed could raise rates if inflation persists.<\/p>\n","protected":false},"author":3,"featured_media":13584,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,73],"tags":[],"class_list":["post-14220","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-private-client-group","category-steady-investors-week"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/14220","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=14220"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/14220\/revisions"}],"predecessor-version":[{"id":14222,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/14220\/revisions\/14222"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media\/13584"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=14220"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=14220"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=14220"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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