May 6, 2026
The Inflation Inferno
The evidence of an inflation wildfire scorching its way through the American economy is no longer a matter of debate—it is a matter of documented, irrefutable fact. The ISM Manufacturing Prices Paid Index surged to 84.6 in April, up sharply from 78.3 in March and a staggering leap from the 69.8 reading recorded just one year ago. Let me be clear about what this means: the cost of raw materials for manufacturers is accelerating at a pace that is not merely troubling, it is abhorrent. This is the kind of input-cost inflation that cascades through every layer of the supply chain and lands, with devastating force, on the kitchen tables of American families.
And what of the Consumer Price Index? The CPI continues to accelerate further out of hand, making a mockery of the Federal Reserve’s so-called 2% inflation target. Inflation has now been above that target for five consecutive years. Five years! At what point does Chair Jerome Powell stop pretending that price stability is even a remote objective of this central bank? The 2% target is not merely aspirational at this juncture—it is a punchline. It is a relic of an era when the Fed at least feigned concern for the purchasing power of the dollar. Powell has let the inflation inferno rage unchecked while patting himself on the back for his supposedly data-dependent approach to monetary policy. What data, exactly, is he depending on? Because the data I see points to a horrific and accelerating destruction of the American standard of living.
The Bond Market’s Warning
If the inflation data were not alarming enough, the bond market is now screaming its own warning with unmistakable clarity. The yield on the US 30-year Treasury is very close to an 18-year high. And this is not an American phenomenon alone. In Japan, Japanese Government Bond yields have surged to levels not seen in 35 years. This is a global reckoning—a worldwide repudiation of the centrally planned, debt-fueled illusion that governments and central banks have constructed over the past four decades. The bond vigilantes are coming back, and they are delivering a verdict on decades of fiscal profligacy and monetary debasement. When the deepest, most liquid credit markets on the planet are flashing red, only a fool or a central banker would look away.
The Consumer Under Siege
The American consumer—the engine that powers roughly 70% of our GDP—is under siege. Rising inflation and surging borrowing costs have conspired to create a vise grip on household balance sheets. The Personal Savings Rate tells the entire sordid story. Before COVID, the savings rate sat at approximately 7%. During the pandemic, when the government flooded the economy with electronic fiat conjured from nothing, it briefly spiked to a staggering 32%. And today? It has plunged to a mere 3.6%. The American consumer is bleeding dry—clinging to what remains of their meager savings and tax rebates from the OBBB. Households have exhausted their pandemic-era savings, maxed out their credit cards at usurious interest rates, and are now staring into the abyss of financial fragility. How much longer can an economy built on consumption endure when the consumers themselves are being crushed?
Powell’s Reign of Destruction
Let the historical record reflect this truth: Jerome Powell has been the single greatest destroyer of the value of the United States dollar in the history of this republic. He has printed $170 billion in just the last handful of months alone. In fact, he conjured up $4.5 trillion at the apex of his horrific tenure. Under Powell, the Federal Reserve’s metamorphosis from a lender of last resort for a troubled financial institution has officially come to its ignominious end. The central bank’s former mandates—stable prices and full employment—have been quietly discarded. Powell’s new dual mandate, the one he actually follows, is twofold: ensure the stock market never suffers a meaningful correction, and guarantee the unemployment rate can never experience even a marginal uptick. This is not central banking. This is central planning of the most dangerous and reckless variety.
The Inevitable Recession
Let me state what Powell and his apologists refuse to acknowledge: the business cycle has not been abrogated. A recession is not merely possible—it is inevitable. The economic downturn that should have arrived years ago has been held in abeyance only by the most massive and record-breaking money-printing spree in Federal Reserve history. But printing money does not create prosperity; it creates the illusion of prosperity while sowing the seeds of its own destruction. The chaos now engulfing the bond market is the clearest signal that the reckoning is near. This recession will not be caused by an external shock or an act of nature. Its cause will be bond market chaos, which is the byproduct of inflation and insolvency—the twin consequences of a central bank that abandoned its principles in pursuit of asset-price inflation.
This is precisely the environment for which our proprietary investment model was designed. By measuring the second derivatives of growth and inflation, we position our portfolios not on the basis of hope, wishful thinking, or blind faith in central bankers, but on the basis of hard data and economic reality. The coming storm demands a strategy built for turbulence, and that is exactly what we intend to deliver.
Turing to the portfolio, we currently hold aerospace and defense stocks, utilities, PMs, Emerging markets, energy, alternative energy, commodities, and T-bills. The portfolio holds zero shorts thanks to the output of the IDEC model. For over two months now we have vacillated between a peace agreement with Iran and annihilating the entire civilization. Another peace deal is being proposed as I speak. However, for now inflation is accelerating and gas prices average over $4.50 cents per gallon. We hold an unusually large amount of cash equivalents but we remain long. The result is we enjoy a great deal of protection and flexibility. This is a period of extreme irrationality and over exuberance. It will not last, and we are prepared to capitalize on the return to reality when it arrives. Meanwhile, we continue to smartly and carefully ride this fragile bull market higher.
This commentary is published by Pento Portfolio Strategies LLC (“PPS”), a Registered Investment Adviser. The information contained herein is provided for informational and educational purposes only and does not constitute investment advice, a solicitation, or an offer to buy or sell any security or investment product. Past performance is not indicative of future results. All investments involve risk, including the possible loss of principal.