Over the past year, markets have reminded us how quickly narratives can shift.

In early April 2025, tariffs triggered widespread fear across global markets. The consensus view was clear: higher inflation, supply shocks, and potentially a severe economic downturn.  As a result we saw some panic selling where the S&P and Nasdaq fell by over 20%.

However the consensus was wrong: 

Instead:

• Equity markets finished the year up roughly 16%. For those who followed Warren Buffett’s advice to “be greedy when others are fearful” and bought near the intra-year lows, returns were closer to 40%.

• Home prices softened

• Inflation remained contained relative to expectations

• Central banks began decreasing interest rates citing the lack of inflation in the economy 

What about today’s inflation fears? From tariffs then to energy now

Gas prices have moved above $2.16/litre, and headlines are once again pointing to inflation risks — higher transportation costs, pressure on consumers, and rising input costs for businesses.

Those concerns are valid. But they are incomplete.

Today’s economy is structurally different from prior cycles:

• Vehicles are significantly more fuel-efficient

• EV adoption continues to grow

• The economy is less energy-intensive overall

• North America is largely energy independent

• Higher oil prices stimulate domestic investment and job creation

In short, higher gas prices still matter — but they don’t carry the same systemic risk they did in prior decades (e.g., 2008).

So what’s the likely outcome?

Rather than a sharp economic break, the more probable scenario is a gradual slowdown:

• Consumers pull back modestly

• Sentiment weakens

• Political pressure builds

On their own, higher gas prices are unlikely to derail the economy.

The real risk comes from a combination of factors:

• Persistently high inflation

• Elevated interest rates

• Weakening employment

If these begin to stack, the outlook changes quickly. Without that combination, the current wave of concern is likely overstated.

What the data is telling us

One of the more useful real-time indicators we track is Truflation.

While not perfect, it has historically shown a ~97% correlation with CPI, typically leading by about one month.

Current readings suggest:

• Inflation will likely tick higher in the near term (as CPI catches up)

• However, the move is not extreme

• Levels remain comparable to where we were just a few months ago

This reinforces the idea that we are not seeing a structural inflation breakout — despite what headlines suggest.

The bigger picture: psychology vs. fundamentals

Right now, the dominant impact of rising energy prices is psychological, not structural.

Markets are dealing with uncertainty:

• Geopolitical tensions

• Policy unknowns

• Short-term volatility in commodities

In these environments:

• Capital often pauses

• Hedging increases

• Volatility rises

But once clarity emerges, those hedges unwind quickly and markets adjust.

Where we’re focused

While short-term inflation headlines dominate attention, the more important forces for portfolios remain:

• AI and automation (deflationary, productivity-enhancing)

• Robotics and efficiency gains

• Policy shifts (tariffs, immigration, supply chains)

• Capital flows, liquidity and global positioning

These are multi-year trends — far more impactful than temporary spikes in oil prices.

Bottom line

• Inflation may rise modestly in the short term

• Higher gas prices will create pressure, but not likely a shock

• The risk is not one factor — it’s multiple factors aligning

• Current fears appear more sentiment-driven than data-driven