Has the Fed given up its focus on core inflation?

The Fed is hiking rates due to inflation, but core CPI is falling. Energy prices, driven by the conflict in the Middle East, are the main inflation driver.

This leaves investors uncertain about the Fed's next move. If oil prices fall, the Fed might pivot to a dovish stance. However, without a peace deal, energy prices are unlikely to drop significantly.

In this environment, shorter-duration bonds are attractive for their yield without rate hike volatility. Diversified equities, especially large-cap quality and international stocks, are favored. Investment-grade credit is preferred over high yield, and emerging market debt could perform well if the dollar is range-bound. If inflation proves persistent, focus on quality stocks with pricing power and ultra-short fixed income.