Last week’s June CPI report showed inflation running at 9.1%, higher than May’s number, dashing hopes that consumer prices had peaked. Data drivers were also broad-based, including energy, food and housing, challenging the Fed’s rate hike pace.

Would 75 bps be enough, or will the Fed kick it up to a previously unimagined 1% later this month? Equity markets seem to be buying the notion that longer-term inflation is still headed lower, so the smaller hike is expected. Credit markets have less conviction.

No surprise that more cash has exited high-yield bond accounts this year than for the same 2021 period ($18 billion vs. $14 billion, per Lipper), with fixed income returns taking big hits. More surprising perhaps is the exodus from retail loan funds. In the past two months almost $10 billion has departed, a reversal from prior in-flows.