Small Caps, Rate Expectations, and Risk-Off

Oil spikes. Gas jumps above $3. Inflation expectations shift in a matter of days. Suddenly the market isn’t debating disinflation or AI productivity. It’s asking whether we’re entering a new inflation shock.

In Episode 177 of Facts vs. Feelings, Ryan Detrick, Chief Market Strategist at Carson Group, and Sonu Varghese, Chief Macro Strategist at Carson Group, walk through what’s happening beneath the headlines. They explain how the Strait of Hormuz disruption is impacting oil flows, why gasoline prices move markets faster than geopolitics, and how rate-cut expectations shifted dramatically in just one week. The conversation moves from energy markets to ISM prices paid, AI-driven infrastructure demand, memory chip shortages, and what this means for inflation volatility in the years ahead.

Key Takeaways:

• Oil shock hits fast: Disruptions near the Strait of Hormuz pushed crude and gas prices sharply higher, immediately shifting inflation expectations

• Rate cuts repriced: Markets quickly reduced expectations for multiple Fed cuts as inflation data and energy pressures mounted

• Inflation volatility regime: Elevated base inflation combined with external shocks increases the risk of short-term price spikes

• AI demand adds pressure: Infrastructure buildout and memory chip shortages are contributing to near-term pricing strength

• Economic backdrop still stable: Leading indicators suggest the economy entered this period near trend, not in recession territory

• Portfolio construction matters: We believe diversifying beyond traditional bonds remains critical in a more inflation-sensitive world.

Jump to:

0:02 — Setting The Stage: Problems Pile Up

1:08 — Gas Price Surge Hits Home

2:46 — Markets Sell Off And Tech’s Role

3:43 — Oil Jumps And Strait Of Hormuz Risk

6:15 — Energy, Diesel, And Food Cost Pressures

8:38 — Firsthand Gulf Perspective And LNG Shock

12:35 — Portfolios For 3% Inflation World

16:24 — Gold, Bonds, And Risk-Off Mechanics

20:07 — Fewer Fed Cuts And PCE vs CPI

24:55 — Small Caps, Rates, And Risk Appetite

28:40 — Fed Independence And Politics Reality

32:48 — Inflation-Volatility Regime, Not The 1970s

36:48 — Diversify Your Diversifiers Strategy

40:25 — VIX Spike And Geopolitics Playbook

45:10 — Trend vs Recession: Leading Indicators

49:22 — ISM PMI: Expansion But Price Pressure

Connect with Ryan:

• LinkedIn: https://www.linkedin.com/in/ryandetrick/

• X: https://x.com/RyanDetrick

Connect with Sonu:

• LinkedIn: https://www.linkedin.com/in/sonu-varghese-phd/

• X: https://x.com/sonusvarghese?lang=en

Questions about the show? We’d love to hear from you! factsvsfeelings@carsongroup.com