What if the Fed badly misjudges inflation as it tops 5% again?
Core back above 5% with the Fed conceding model failure is a bear-steepener: front-end and reals gap up together, breakevens un-anchor, and long-duration tech is sold hardest as the discount rate jumps. This is the August/September 2022 hot-CPI playbook — the S&P's worst day since 2020 and a fresh leg into the bear market. Forward: starting from a higher term premium and a politically pressured Fed, the credibility loss bites the long end harder than 2022.
how we built this number — every step
The class rate is measured from our dated, sourced event library (decade-normalized Poisson — the full table is public at base_rates.json). The variant’s share within its class is the analyst’s editorial call, published so you can audit it. A wider range means thinner precedent. Full recipe: methodology · scored at Reality Check.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (gold) over time vs the crowd's (Polymarket, blue), from the past toward the 0–6 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. The gold path is an illustrative reconstruction anchored to today's estimate — real dated events, not a live re-estimate history.
What it would mean
If this plays out, it is a risk-off shock. Fed admits its model failed as core inflation re-accelerates above 5%, gutting forward-guidance credibility and steepening the curve violently. The trigger decomposes into signed root‑shocks — Fed policy path ▲ · Inflation surprise ▲ — which propagate through our causal graph to the markets below.
If it happens — the markets it would move
Biggest moves first. Projected moves are cascade-model priors; hist A–B% = what comparable past events actually did (measured abnormal returns), and model prior · unmeasured marks markets with no analogue backing yet. Tap any market for its price history.
| Market | Class | Projected move | |
|---|---|---|---|
| 1 | MicroStrategy MSTRon Hyperliquid 📈 chart | Equity | ▼ -2.9% hist -2.26–-0.58% · other way -1.72% (n=12) |
| 2 | Solana SOLon Hyperliquid 📈 chart | Crypto | ▼ -2.0% hist -8.69–+2.25% · other way +18.86% (n=8) |
| 3 | Tech sector XLK 📈 chart | Equity | ▼ -2.0% hist -1.36–-0.42% · other way -1.29% (n=12) |
| 4 | Nasdaq 100 NDXon Hyperliquid 📈 chart | Index | ▼ -1.9% hist -1.91–-0.26% · other way -1.37% (n=12) |
| 5 | Bitcoin BTCon Hyperliquid 📈 chart | Crypto | ▼ -1.7% hist -6.24–+1.35% · other way -1.39% (n=9) |
| 6 | Ether ETHon Hyperliquid 📈 chart | Crypto | ▼ -1.4% hist -3.06–+0.46% · other way +1.84% (n=8) |
| 7 | Hyperliquid (HYPE) HYPEon Hyperliquid | Crypto | ▼ -1.4% model prior · unmeasured |
| 8 | Gold XAUon Hyperliquid 📈 chart | Commodity | ▼ -1.4% hist -0.77–-0.07% · other way +0.42% (n=11) |
| 9 | 30y Treasury yield DGS30 📈 chart | Rate | ▲ +12bp hist -0.68–+18.74% · other way +18.3% (n=12) |
| 10 | 10y Treasury yield DGS10 📈 chart | Rate | ▲ +11bp hist -1.76–+19.57% · other way +18.0% (n=12) |
| 11 | US dollar (DXY) DXYon Hyperliquid 📈 chart | FX | ▲ +0.9% hist +0.04–+1.06% · other way +0.12% (n=12) |
| 12 | S&P 500 SPXon Hyperliquid 📈 chart | Index | ▼ -0.9% hist -1.61–+0.21% · other way +2.95% (n=12) |
| 13 | 2y Treasury yield DGS2 | Rate | ▲ +9bp model prior · unmeasured |
| 14 | Coinbase COINon Hyperliquid 📈 chart | Equity | ▼ -0.9% hist -1.16–-0.04% · other way +7.32% (n=5) |
Probable recommendation
Why we may diverge from history
Trust the cascade long on VIX: its -12.5% history is a thin, mixed 8-window sample (2022 CPI prints went both ways); a Fed losing inflation credibility spikes vol regardless of base rate.
Historical precedent — what analogous events actually did
Across 40 analogous events (overlap‑weighted), as abnormal returns — market beta stripped, so it's the event's own effect, not the market backdrop. Shown at 20 days (persistent) and 5 days (immediate); ↺ fades = the two horizons disagree. Confidence = consistency × sample × significance.
| Asset | History says | Abnormal (20d · 5d) | Hit | n | Confidence | vs cascade |
|---|---|---|---|---|---|---|
| ARM ARM | SHORT | -10.7% · 5d -10.3% | 91% | 11 | 0.62 | ✓ matches cascade |
| AMD AMD | SHORT | -4.9% · 5d -3.3% | 71% | 39 | 0.35 | ✓ matches cascade |
| CNY CNY | SHORT | -0.5% · 5d -0.2% | 67% | 39 | 0.33 | ✓ matches cascade |
| TSM TSM | SHORT | -0.5% · 5d -1.5% | 64% | 39 | 0.27 | ✓ matches cascade |
| MSTR MSTR | SHORT | -0.8% · 5d -2.4% | 62% | 39 | 0.22 | ✓ matches cascade |
| XLK XLK | SHORT | -0.4% · 5d -0.9% | 64% | 39 | 0.22 | ✓ matches cascade |
| NVDA NVDA | SHORT | -4.6% · 5d -5.3% | 62% | 39 | 0.20 | ✓ matches cascade |
| USDJPY USDJPY | LONG | +0.1% · 5d -0.1% ↺ fades | 60% | 39 | 0.19 | ✓ matches cascade |
| Gold XAU | LONG | +0.4% · 5d -0.4% ↺ fades | 60% | 39 | 0.18 | ⚠ differs |
| Bitcoin BTC | SHORT | -5.0% · 5d -5.1% | 60% | 38 | 0.17 | ✓ matches cascade |
| 30y yield DGS30 | LONG | +12bp · 5d +2bp | 60% | 40 | 0.17 | ✓ matches cascade |
| INR INR | SHORT | -0.1% · 5d +0.2% ↺ fades | 60% | 39 | 0.16 | ✓ matches cascade |
| US dollar DXY | LONG | +0.6% · 5d +0.1% | 57% | 40 | 0.14 | ✓ matches cascade |
| SMH SMH | SHORT | -0.5% · 5d -1.1% | 58% | 39 | 0.14 | ✓ matches cascade |
Why this probability
Core re-accelerating above 5% with explicit Fed mea-culpa is rare; disinflation broadly holding mid-2026. A base‑rate‑anchored prior, continuously scored against what actually happens — not a forecast.