Higher For Longer And Longer

U.S. equity markets finished mixed-to-lower in a volatile Fed week as the central bank delivered its first rate hike since 2023, while another turbulent stretch for oil prices kept inflation concerns firmly in focus. As expected, the central bank raised the Fed Funds Rate by 25 basis points, but the accompanying statement and press conference signaled that additional tightening remains firmly on the table. Treasury yields extended their dramatic repricing, with the 10-Year reaching 5% and the 2-Year climbing to 4.75% as markets increasingly embraced a renewed "higher-for-longer" interest rate environment this week. Energy markets remained volatile as attacks threatened Saudi Arabia's key Hormuz bypass, while gasoline approached $4.50/gallon and diesel reached record highs, adding further pressure to the inflation outlook nationwide. REITs declined 2% but avoided the severe rate-driven selloff seen in prior years, showing relative resilience despite sharply higher Treasury yields and increasingly challenging financing conditions for real estate investors. Housing data showed renewed pressure from higher borrowing costs, with construction activity slowing and builder sentiment matching its lowest since 2022, while surprisingly strong retail sales highlighted continued consumer resilience.