Inflation Regimes · monthly refresh

Core PCE Above 3%

The Fed's preferred inflation measure runs hot

Core PCE (Personal Consumption Expenditures excluding food and energy) is the Fed's preferred inflation measure. Above 3% puts it well above the 2% target and ensures the Fed maintains restrictive policy until it declines.

ALAN INTELLIGENCE

ALAN INTELLIGENCE · alanglobalintelligence.com

ALAN IntelligenceData as of 2026-08-30

Every historical instance, overlaid — S&P 500 forward path from the event

Each instance (n=5)Median path25th-75th percentileCurrent: 2026

Median forward returns by horizon

Bars: median S&P 500 forward return. Whiskers: 25th-75th percentile. n = 5 occurrences.

Based on 5 historical occurrences. Last triggered: 2026-01-01.

Past performance is not indicative of future results. This material is for informational and educational purposes only and does not constitute investment advice, an offer to buy or sell any security, or a recommendation. Data from publicly available sources believed to be reliable but not guaranteed. All investments involve risk, including possible loss of principal.

alanglobalintelligence.com

ALAN GLOBAL INTELLIGENCE · alanglobalintelligence.comSource: FRED PCEPILFE · Generated 2026-08-30

Historical occurrencesshowing 5 of 5

Date	1M return	1Y return	5Y return
1966-11-01	-0.8%	+14.7%	+20.9%
1972-09-01	-1.1%	-5.7%	-13.2%
1987-04-01	-1.5%	-11.7%	+39.4%
2021-04-01	+4.3%	+12.7%	+69.8%
2026-01-02	+0.9%	—	—

What history says

Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.

Core PCE above 3% means the Fed cannot cut rates

The Fed's dual mandate targets 2% PCE inflation. At 3%+, rate cuts are off the table regardless of labor market conditions. This removes a potential equity catalyst.

PCE vs. CPI: PCE is typically 30-50bp lower

PCE uses a broader consumption basket and allows for substitution effects. When CPI is at 4%, PCE is typically at 3.5%. The Fed cares about PCE, not CPI.

Services inflation is the sticky component

Core PCE above 3% is almost always driven by services (housing, healthcare, insurance) which are slow to adjust. Goods disinflation helps but cannot single-handedly bring core PCE to target.

For your portfolio

With the Fed's preferred gauge this far above target, rate cuts are effectively off the table — so audit the portfolio for positions whose thesis quietly depends on cheaper money, such as leveraged holdings or speculative growth. Meanwhile, restrictive policy means idle cash finally earns a meaningful yield: review where yours is parked and what it is being paid.

More Inflation Regimes charts

CPI Inflation Above 4%

High-inflation regime and asset allocation

Core CPI Above 3%

Underlying inflation pressure persists

CPI Returns to 2% Target

Inflation normalized — what changes

Core Inflation Crosses 4% — When Price Pressure Becomes Embedded

S&P 500 returns after core CPI exceeds 4% year over year

Inflation Crosses 3% — Above the Fed's Comfort Zone

S&P 500 returns after headline CPI exceeds 3% year over year

Inflation Crosses 5% — Entering a Hot-Inflation Regime

S&P 500 returns after headline CPI exceeds 5% year over year

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For information and research only. Not investment advice. ALAN does not place trades or execute orders. Figures come from the sources shown and can lag the market; verify independently before making decisions. Past performance is not predictive of future results.

Date

1M return

1Y return

5Y return

1966-11-01

-0.8%

+14.7%

+20.9%

1972-09-01

-1.1%

-5.7%

-13.2%

1987-04-01

-1.5%

-11.7%

+39.4%

2021-04-01

+4.3%

+12.7%

+69.8%

2026-01-02

+0.9%

—