Federal Reserve Faces Tricky Balance as Economy Defies Expectations

If the Fed does not cut rates this year as expected, inflation could remain sticky and above the 2% target due to supply chain issues, higher shipping costs, and rising wages.

The economy and markets have proven more resilient than anticipated, so the path to lower inflation may require rates staying higher for longer.

If rates remain elevated, the recent stock market rally could reverse, especially for small caps, tech stocks, and non-dividend payers.

The US dollar would likely strengthen further if rate cuts are delayed, putting pressure on dollar-denominated assets like gold.

Oil prices could fall if higher rates and inflation prompt tougher consumer conditions and lower oil demand, though geopolitical tensions provide some support.