Next week is the first “real” macro test of 2026: inflation takes center stage. If the market has one story right now, it’s this — cooling inflation opens the door to cuts, cuts stabilize yields, and stable yields keep risk assets supported. The entire chain depends on the next set of prints.
This is the kind of week where narrative shifts happen fast. A soft inflation read can reinforce risk-on. A hot read can reprice yields quickly — and that repricing usually hits the most crowded winners first.
In this regime, inflation prints act like a permission slip for markets to maintain a bullish stance. Soft data supports the “two cuts” framework; firm data forces a rethink. That’s why CPI/PPI weeks tend to carry more emotional price action than the data alone would justify.
If inflation surprises, the reaction often shows up first in yields and the dollar — and then equities follow. Those cross-asset tells matter because they reveal whether the market thinks policy needs to stay tighter for longer.
After a positive first full week, sentiment can get complacent. The market doesn’t need “bad news” to pull back — it just needs a narrative mismatch: expectations too high, reality a little firmer.
Next week is about inflation and what it does to rates. If yields stay calm, risk can extend. If yields jump, expect a fast rotation and some volatility in the leaders.