15 JANUARY 2026
Historically there has been a tight correlation between the annual change in US gasoline prices (red line, right axis) and 10yr inflation expectations (blue line, left axis).
Which means all eyes should be on energy costs as we head into 2026.
If US forecourt prices stay around current levels, inflation expectations should remain in check. That would encourage the Federal Reserve to keep easing and, in such a scenario, the risk of a major stock market upset would be relatively low.
The good news is that, all things equal, a significant increase in energy prices appears unlikely; demand is sluggish and supplies are plentiful.
Although a host of factors could foster rising energy costs (and higher inflation expectations), including another geopolitical flare-up and/or a strong acceleration in economic growth.
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