For nearly two years, Americans have held their breath.
Every trip to the grocery store, every rent payment, every fill-up at the gas station, it’s all been a reminder that the cost of living climbed faster than anyone expected.
But something changed this month.
The latest inflation report came in cooler than Wall Street predicted. It’s the biggest sign yet that the pressure might finally be easing.
For the first time in a while, we’re seeing inflation slow. And with a twist almost no one saw coming … The economy is proving far more resilient under Trump’s tariffs than experts expected.
Powell is late to the party on these interest rate cuts. And we could see the Fed play catch up in 2026.
Which would finally help everyday Americans feel some relief. As well as boost the market.
Don’t let the doom and gloom from the headlines fool you.
Even during uncertain times, the market still gives us reasons to hope and opportunities to act.
Good Inflation Numbers
Now that inflation cooled, the tables have turned.
The latest Consumer Price Index, the most closely watched inflation gauge in the country, rose just 2.7% year over year, far below the 3.1% economists expected.
Even the “core” CPI, which strips out volatile food and energy prices, came in at 2.6%. A full half-point cooler than forecasts.
That’s a signal from the market.
It means the Federal Reserve’s war on inflation may finally warrant even lower interest rates.
Remember, high interest rates are designed to cool off the economy and taper inflation by making borrowing more expensive. Businesses pay more to expand, consumers pay more for credit, and investors get punished for taking risks.
But when inflation slows, the Fed can ease off the brakes. That means lower borrowing costs, cheaper capital, and more liquidity flowing back into the market.
It’s no coincidence that stocks jumped the moment this report dropped. Futures surged, the QQQ jumped, and the probability of a March rate cut climbed to 58%.
Lower rates mean companies can reinvest, hire more workers, and lift wages.
Consumers can spend again without fear of rising costs. It’s a domino effect that turns pessimism into possibility.
This shift could mark the first real turning point for the economy in years.
Once rates fall and confidence returns, the momentum in the market will accelerate.
The setup I’m watching now could be the first trade of this next phase. And it might trigger sooner than anyone expects.
My Top Trade Setup Right Now
When the Fed cuts rates, the bond market experiences a direct effect.
Here’s the logic: When interest rates drop, older bonds with higher yields become more valuable. Investors rush to buy them, pushing bond prices higher. It’s one of the most predictable relationships in finance … Until it isn’t.
Lately, that link’s been out of sync. Even after three straight rate cuts this year, the iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT) hasn’t exploded higher the way we’d expect.
Traders are still hesitant. Caught between optimism about lower rates and fear that inflation could flare again.
But the market doesn’t stay out of balance forever.
Every rate cut adds more pressure. Every cooler inflation print chips away at doubt. And sooner or later, that pent-up energy has to release.
That’s why I’m still watching TLT closely. When the ETF starts to climb decisively, it means traders believe the Fed pivot is real and looser monetary policy is on the way.
We’ve already seen a bit of bullish momentum since the CPI announcement on December 18.
Look at the TLT chart below. Every candle represents one trading day:
And if the Fed cuts rates more aggressively, it’s not just bonds … Stocks will follow.
We could be staring at the early stages of a broader market breakout.
The Fed’s next decision will either confirm this shift or delay it. But the setup is already building. And it could move fast.
Stay Street Smart,
Jeff Zananiri
