Industrial Production

The critical insight the market may be underpricing is the inflation pipeline lag — PPI at +0.7% 3M is building pressure that will not appear in CPI until April/May releases, meaning financial conditions will face a second tightening shock from inflation data just as markets might be tempted to price in de-escalation. A print above 3.5% would trigger a significant repricing of the Fed reaction function and likely push 10Y yields to 4.60-4.90%, compressing equity multiples sharply and validating the BEARISH equities view with higher conviction. (4) The diplomatic parallel track (Trump simultaneously threatening and negotiating) introduces non-zero de-escalation probability (20%) which is the single greatest downside risk to the current energy/gold positioning.

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