Inflation and Fed Outlook (with Tom Keene, Paul Sweeney)

Rob Sockin sees an overheating economy with nominal GDP at 5.5-6%, inflation risks skewed to the upside due to deglobalization and tariffs, and expects the Fed to hike three times this year. He believes the AI story is orthogonal to rates, making softer inflation ideal for equities.

Yields up , short term, interviewee explicit

explicit

NDX cautious up , medium term, interviewee implicit

implicit

RUT

Oil

Metals

USD

PGIM 7.8
Asset Manager $1400.00B
Rob Sockin 8.5

Inflation and Fed Outlook (with Tom Keene, Paul Sweeney)

ndx

AI story is orthogonal to rates, but hotter inflation means Fed stays hawkish which is negative for equities. Softer inflation would be ideal.

yields

We think they're going to hike three times this year

7 calls

+4

no reliable edge (random outcomes)

5/29/2026 12:40:23 PM	short term cautious up	7 days later	+1.72%	+0.86%
5/8/2026 4:06:17 PM	medium term cautious down	21 days later	+1.47%	-0.74%
4/22/2026 1:36:12 PM	short term up	5 days later	+0.72%	+0.72%
3/13/2026 9:58:26 PM	short term up	7 days later	+2.70%	+2.70%
1/7/2026 1:57:49 PM	medium term cautious up	20 days later	+1.63%	+0.81%
1/5/2026 10:58:21 PM	medium term up	20 days later	+0.81%	+0.81%
12/4/2025 5:57:16 AM	medium term up	21 days later	-0.07%	-0.07%

Show all 7 yields results

What are you going to look at within the wall of data?

Tom Keene
Rob Sockin

Activity is holding up well; key is inflation numbers. Looking for 0.35% month-over-month core PCE, 3.4% year-over-year.

Jobless claims will look good, consumer showing signs of strain but holding in.
Are we peaking in inflation?

Tom Keene
Rob Sockin

At year-end we're closer to 3% on core PCE, but risks are heavily skewed to the upside. Leading indicators like PPI and supply chain surveys still look firm.

I don't have a lot of confidence we'll get gradual disinflation in the back half.
Has the Fed addressed deglobalization and onshoring trends suggesting higher underlying inflation?

Paul Sweeney
Rob Sockin

Supply shocks from deglobalization and tariffs are keeping inflation away from target. The Fed will remain hawkish even with oil prices down.

We've missed inflation target for many years due to these trends.
What year-over-year CPI is optimal for equity markets?

Tom Keene
Rob Sockin

Softer inflation would be ideal for equities. A miss on PCE below 0.3% month-over-month would be favorable but unlikely.

The AI story is largely orthogonal to rates.
Nominal GDP is 5.7% - that's all I need to know.

Tom Keene
Rob Sockin

We've been calling this the overheating economy. Nominal GDP growth of 5.5-6% is where we're landing.

Real side is good - resilient economy driven by AI capex and upper income consumer. Worrying part is inflation far above Fed's target.
How will Kevin Warsh interpret this data?

Paul Sweeney
Rob Sockin

This is a Fed with a one-sided mandate: price stability. They'll have to hike rates to bring inflation back down.

Not much focus on activity or labor market, lots of worry about inflation.
What's the harm of banana republic nominal GDP?

Tom Keene
Rob Sockin

Affordability issues are reflected everywhere. Warsh is looking at 5+ years of missing the inflation target. We think they'll hike three times this year.

3% is not 2%, even 2.5% is not 2%.

SignalTube

markets at a glance