Cure for higher oil price is higher oil price. Yesterday saw immutable laws in action: supply chain cannot rewire quickly, and debt servicing costs through spiking yields feedback loop.

Near-term: duration of Middle East conflict impacts inflation expectations. Even without prolonged disruption, shock could disrupt low inflation/low interest rate narrative. Longer-term: watching wage dynamics - average hourly earnings growing 3.5% 3-month annualized consistent with core inflation closer to 3% than 2%. Cannot be complacent about inflation longer-term.

Markets pricing 1.5 additional cuts this year. No reason to push back. Labor markets could give Fed cover to keep cuts, offset by inflation pressure from wage dynamics. Growing division within Fed highlights tougher trade-offs.

What governs risk appetite is immutable laws. Headlines volatile and scary, but feedback loop considerations: global supply chain needing to rewire quickly and consequences of spiking yields on debt servicing dynamics.