Inflation remains elevated despite softer-than-expected August readings

A meaningful decline in PCE readings over the next two months would likely ease Fed pivot expectations, potentially supporting equity valuations and reducing pressure on rate-sensitive sectors, though such a sharp reversal would require a significant demand or supply shock.

Inflation remaining sticky at current levels would plausibly keep the Fed on hold longer than markets have priced in, sustaining elevated real yields and maintaining headwinds for growth-dependent equities and high-leverage borrowers.

A further acceleration in PCE would historically shift Fed communications toward extended restrictive policy, putting downward pressure on equities and extending the duration of elevated borrowing costs across consumer and corporate credit markets.