Saad Ullah
Everyone's watching the Fed's next move and parsing every CPI release. But here's what most are missing: the fourth quarter has historically been when inflation either breaks or builds momentum. As we approach Q4 2025, the signs point to another potential inflection point that could catch markets off guard.
Why Q4 Matters for Inflation
Looking at historical data reveals a clear pattern - major inflation cycles often pivot during the final quarter. This isn't random. Q4 brings together several forces: holiday spending ramps up, companies make year-end purchases, and fiscal policies often shift. These factors create a natural pressure cooker for prices.
The current setup looks familiar. After months of seeming stability, underlying inflation pressures are quietly building. Energy costs remain elevated, wages continue climbing, and supply chains still face periodic disruptions.
Reading the Current Environment
While headline numbers have cooled from their peaks, the underlying dynamics tell a different story. Core price pressures persist across services, housing costs remain sticky, and labor markets stay tight. The data suggests we're in a consolidation phase rather than a genuine decline.
If historical patterns hold, Q4 2025 could trigger the next upward leg in the inflation cycle. This wouldn't be a sudden spike but rather a sustained shift that extends well into 2026.
Investment Implications
Smart investors should prepare for this possibility now. Higher inflation creates clear winners and losers: bonds get hammered as real yields turn negative, while commodities and certain equities benefit from pricing power. The dollar's direction will depend entirely on whether the Fed stays ahead of or behind the curve.
Saad Ullah
