Oil prices have broken $100, and the market has pushed the probability of a rate hike on July 29 from around 12% to nearly 38%. At the current rate of global inventory depletion, any shipping attack could push prices back above $110. In theory, the Fed is more cautious than before—they need to observe whether this will transmit to core inflation before considering a rate hike. Honestly, from my perspective, even if it impacts core inflation, the Fed probably wouldn’t dare to hike rates recklessly. For now, they’re just keeping the option for a September hike open. The 10-year Treasury yield is hovering between 4.5%–5%, which can be seen as the real interest rate. Based on current data, the S&P 500 forward P/E ratio is about 19.7x, corresponding to an earnings yield of roughly 5.08%, which is only 0.4 points higher than the real interest rate—leaving almost no buffer for earnings misses. Right now, tech stocks are the safe haven for everyone’s money, but if long-term yields continue to rise, tech stocks will quickly face valuation compression. Even if rates don’t rise further, just maintaining the current market valuation is far better than hiking rates to crush that tiny bit of inflation.