Inflation Surges and Market Faces Turmoil What’s Next for Your Money

Well, good morning. Yes, it's me, Kenny Polcari, your host of the party. And today is Thursday, March 19th, 2026. And here are the things you need to know to get your day started. Well, it's a hotter PPI and it reignites the inflation narrative. And Powell, well, he stands pat and he hints at higher for longer. And investors, well, they reprice risks and stocks decline. The Mideast conflict rages on. And what do we have for dinner tonight? We're going to have the pork chop pizzaiola. Delicious. You're gonna love this one. Okay, now yesterday was all about the inflation at the producer level, right? The PPI and the Fed policy decision. And it was not pretty. Let's start with that. The PPI came in much stronger and hotter than expected, and that set the tone at 8:30. Futures that were higher in the pre-market did a 180 and never recovered. And it only got worse after JJ took the stage at 2:30. Now remember, the Producer Price Index, the PPI, measures the cost of producing the goods that we ultimately buy. And when those costs rise at the producer level, then there's a high probability that those costs are going to eventually get passed on to who? The consumer, you and me, which means higher consumer prices down the road. Now typically, there's a lag of several weeks to a couple of months before the higher prices begin to show up at the consumer level. So yesterday's report immediately raises concerns that next month's CPI could be stronger as well, and certainly the one after that. And that is not what investors or the Federal Reserve want to see right now. And we just— we've been discussing this very point. Now, to be clear, the numbers were significantly hotter than expected. And these are not small misses. These numbers suggest that inflation pressures are still very much alive, something that I've been screaming about for months. And here is what makes this report even more important. These are the February numbers, which means this report reflects inflation before Operation Epic Fury even took off. In other words, before the recent surge in oil prices and geopolitical tensions that are now rippling through the world and through the energy market. So producer prices were already rising before that event. You have to ask yourself, what happens next? What will the March CPI look like? What will the March PPI look like? Well, here are the numbers just so you understand. The headline PPI number came in at +0.7%, well above the expectation. Core PPI came in at +0.5%, again above the expectation, right? Those are both month-over-month numbers. The PPI year-over-year came in at +3.4%. And the core PPI number even worse at +3.9%, nearly 4%. Not a good number, right? It was not a small miss by any stretch. Now, futures, which were up triple digits on both the Dow and the Nasdaq, well, they got whacked when that number came out. The tone went from mildly positive to negative in a hurry. Then the bell rang and boom, down we went. And that wasn't the end of it. Investors still needed to hear what Jay Jay was going to say. And that moment came at 2 PM when the Fed decision came out, and then, and then at 2:30 when Jay Jay actually took the stage. Now, as expected, the FOMC held rates steady, leaving the Fed funds target rates unchanged. But that was expected, so that's not the surprise. But as always, the real story wasn't the rate cut, it wasn't the rate decision itself. The real story was the tone, the message, and the implications for rate policy going forward. And the message from Jay Jay was very clear. The Fed is in a tough position and it, it is important to keep policy mildly restrictive. I think it's perfect, but rising energy costs are gonna likely boost inflation and that certainly does not support the argument for multiple rate cuts this year. In fact, Powell is still penciling in just one cut in '26 and one cut in 2027. But traders, they're increasingly questioning whether even that is realistic as the probability of rate cuts continues to decline. Recall that just 3 weeks ago, the market was pricing in a 55% chance of a June rate cut. Today, not so much. The probability of a June cut has now collapsed to below 10%, and the September cut, that's only about 12%. Powell went on to say, and I quote, the implications of developments the Middle East for the US economy are uncertain, and the committee is attentive to the risks to both sides of its dual mandate. If we do not see progress on inflation, then we won't see a rate cut. I know, couldn't be any clearer to me. And after yesterday's hot PPI report, it has become increasingly clear that progress on inflation is not happening. In fact, the conversation may now shift from when the Fed cuts rates to whether the Fed might actually have to consider a rate hike before it considers another rate cut. And all of this caused the VIX to surge. It rose 12% yesterday to end the day at 25.10, and stocks moved lower, which does not mean that there are not buyers. Remember, it just means that the buyers are taking advantage of the news and they're moving their bids lower causing the sellers to become anxious and more aggressive, and that causes the buyers yet to move lower again. And so the cycle continues and stocks decline, right? It also works in reverse, right? The buyers get anxious and the sellers, uh, the, the sellers move higher. Anyway, at the end of the day, this is what it looked like. The Dow lost 769 points or 1.6%. The S&P gave back 92 points or 1.4%. The NASDAQ lost 327 points or 1.5%. The Russell gave back 41 points or 1.6%. The trade puts gave up 192 points, um, or 1.1%. The equal-weighted S&P choked, losing 102 points, uh, or 1.3%, while the Mag 7 gave up 485 points or 1.5%. Bonds got hit as well on the idea that rates are not going any lower, in fact might be going higher. The TLH and the TLT both lost 6/10 of a percent, and that sent yields higher. The 10-year is now yielding 4.27%, the 30-year is yielding 4.89%. And while we're still below the levels that sure to cause angst. We're getting ever closer, so expect stocks and investors to pay very close attention. Oil— not helping the situation. Brent crude is now kissing $114 a barrel, and West Texas is trading at $96.50 as the conflict in the Middle East rages on. Iran hitting an LNG facility in Qatar, causing extensive damage, only raises the temperature across the region and across the world. The latest attack threatening a longer-term supply disruption raising the prospects of higher longer-term energy prices, which raises the prospects of higher inflationary pressures on the global economy. Oil now remains in the $90-$120 trading range, with the path of least resistance at the moment is higher, not lower. Gold, that's down again this morning. It's off $145 or about 3%, trading at 4,674. In fact, gold has now lost about 14% since the start of this conflict. And has broken through its short-term support trend line, putting the intermediate trend line of $4,590 squarely in focus. So you have to ask, what happened to gold as the ultimate safety trade? Well, nothing really. It still plays that role, but let's be honest about what happened first. Gold has skyrocketed, right? It's up more than 200% over the past 3 years. It's gold. And at one point was up nearly 90% over the last 12 months alone. Smashing record after record as investors just piled in and the Momo guys just piled in. A big part of the move was driven by the declining US dollar, which had been weakening on the belief that the Fed was going to continue to initiate this aggressive rate cut cycle, sending the dollar lower. That story seems to be changing. The dollar did go lower as the Fed cut rates, right? And that helped gold and that gave gold the strength to go higher. But the dollar stopped declining in late January. After technically becoming oversold. You can check it out on its Relative Strength Index chart. You can see we got into the oversold position on the dollar over the last 6 weeks. The dollar has rallied about 5%, moving from 95.55 to 100.11, breaking up and through all 3 trend lines and now pushing above the November high. If the dollar continues to advance from here, history tells us exactly what that means. It means more pressure on gold, because remember, gold and the dollar have this inverse relationship. A stronger dollar makes commodities like gold more expensive globally, which tends to pull prices down, while a weaker dollar tends to push it up. And we just saw that, right? The dollar fell and gold skyrocketed. And right now it's the dollar that has the momentum, so it's going to put more pressure on gold. For now, $4,590 is the next support line for gold, and if that fails, then it opens the door for gold to test a long-term trend line at $4,080. The dollar, well, support is down at $98.20 with resistance right here at $100 spot 10. If the narrative becomes a rate hike, then watch the dollar surge and gold fall. If the narrative remains wait and see, then maybe we're going to see some churn in both. ECO data today includes new home sales. They're expected to be down 2.7% while building permits are expected to be up 0.2 tenths of a percent. European markets are all weaker. Every country across the zone is down better than 2% as the conflict in Iran intensifies. Remember, Trump said that if Iran continues to target Qatar's energy infrastructure, that he was ready to blow up Iran's South Pars gas field. And so the conflict is not— doesn't seem to be resolving itself anytime soon. Now Iran is just poking them in the eye, getting them to do it. Now, US futures are lower this morning, although they're off their overnight lows. Dow futures are down 75 points, the S&P is off 11, the NASDAQ down 66, and the Russell is down 15. Look, the tone again is not so positive, but it's also not about collapse. The Dow has broken its long-term trend line of 46,530. It is now down about 8.5% from the high, which is uncomfortable but still very much within its normal correction band. Not on the year, off its high. That now puts 45,250 squarely in the bullseye, a level that we last saw in the summer of '25. The NASDAQ has also broken its long-term trendline, leaving it down about 8% off its high. Again, not pleasant, but still within what's considered a normal trading band. The Russell has not broken its long-term trendline, and neither has the equal-weighted S&P, which is important because it suggests that the broader market has not completely lost its footing. Or at least not yet. Now, the S&P closed yesterday at 6624, down 91 points, leaving it just 9 points away from once again kissing its long-term trend line at 6615. At the moment, that index is down 5.5% from its high. Now, if the trend line breaks, it likely sets the market up for, uh, a test of 6500 on the S&P, a level that we last saw in September 2025. And even that move is only 7.5% off of its high. Again, still within what is considered a normal trading band for the market. So what's it all mean? It means that the market is correctly— and frankly, this should not be a surprise. We discussed this, we discussed this at the end of the year, we discussed this in January. I told you at the beginning of the year to expect a pullback for a number of reasons. Now, while the Middle East conflict was not one of the factors in January, It is clearly part of the story today, and so that's helping to fuel the move lower, right? Which is only gonna, uh, which only adds to the story, right? But remember this as well: when the markets pull back like this, opportunities begin to appear. If you look around, you're going to find some very, very good companies that have been absolutely slammed in this move, and we've discussed that in prior notes, especially in the tech space. And that's exactly where you need to start looking if you're a long-term investor. And if you're feeling anxious, do a couple of simple things. Make sure you understand what you own and why you own it. Stick with the biggest, most liquid names. Talk to your advisor. And most importantly, do not panic. And look, if you want to, call me, 561-931-0190, and let's talk about it. Let's talk about the risk in your portfolio. Let's talk about the risk you're willing to take. Let's talk about whether or not you're taking on too much or not enough. Because you can also do that, right? If you don't, if you're not properly diversified and set the risk up right, you may not hit your end goal. In any event, what do we have for dinner tonight? We're gonna have the Pork Chop Pizzaiola. Now, just like its sister recipe, Steak Pizzaiola, Chicken Pizzaiola, this is a hearty, full-bodied dish that can be eaten all by itself and enjoyed with a glass of Chianti or a vino di tavola, right, which is simple table wine. No need to go over the top on this because it's all about enjoying the meal and enjoying the moment. Now for this, you need thick-cut pork chops on the bone, probably like 3/4 of an inch thick. You need olive oil, oregano, garlic, onions, red and green bell peppers, a can of crushed tomatoes— not puree, you want crushed tomatoes— you need red wine, salt and pepper, and you need crushed red pepper flakes if you really want to make it hot. Those are optional. I don't use it, but you can. In a saucepan, heat the olive oil, add the crushed and sliced garlic, move it around for a couple of minutes, sauté it till it's nice and golden. Gonna add in the sliced onions and the julienne bell peppers. Turn heat to medium and cover it. When the onions and the peppers are soft, might take 5 to 8 minutes or so, you're gonna add the crushed tomatoes, the can of crushed tomatoes. You're gonna add the oregano, the red pepper flakes if you're using it. You're gonna do the salt and pepper. You're gonna turn the heat up, bring it to a quick boil, and then return the heat to medium. Now you're going to add the red wine, not a lot, half a cup at max. Um, you're going to let it simmer and you're going to thicken up. You're going to let the alcohol burn off, you know, 10 to 12 minutes. So leave it open, don't cover it. Next, while that's happening, you're going to rub the chops with a little bit of olive oil and salt and pepper. Simple. Don't drown it, just enough olive oil that you're going to massage the chops on both sides and get them ready for the hot skillet. Now, and take a separate hot skillet, heat it up, make it nice and hot, and add the, uh, and add the pork chops. If you have a rib skillet, it's even better. You want to sear it for 4 minutes on each side, so 4 minutes, and then turn it over and do another 4 minutes. Turn the heat down to medium-low. Then take the other pot with the sauce in it and pour it all over the chops in the, in the, in the skillet, and turn the heat down low and let it sit there for 10 minutes. Should give you a nice medium chop. And if you prefer, let it simmer a little bit longer, it'll be more well done. Whenever you're ready, when it's done, remove the chops from the, from the saucepan and arrange it on the plate. Stir the sauce in the skillet pan a little bit to deglaze it, and then make sure that you scrape any bits off the bottom. And then using a spoon, spoon the sauce over the chops, making sure that you get the onions and the peppers, um, all over the, all over the chop. Serve that immediately with a glass of Simple. The Chianti or the vino di tavola, and you are done. In any event, it is another gorgeous day here in South Florida. It's going to be about 75 degrees, sunny. The skies are blue. There's a couple of clouds there, but nothing dramatic. Until tomorrow, take good care.