Comments based on information available as of 5:15 am CT on 4/17/2026

Growth: Turn Up the Volume?

Pepsi’s first-quarter results offered a small but telling signal that the era of aggressive price hikes is hitting a wall.* After years of relying on pricing to offset costs, the company cut prices on core snack brands and immediately saw volumes turn positive for the first time in more than two years. This shift suggests that pricing power is not an inexhaustible resource and that businesses are now pivoting to protect market share rather than testing the price elasticity of consumers. While volume-led growth is slower and less glamorous than price-driven gains, it represents a healthier transition toward real economic growth rather than nominal increases flattered by inflation. It could be challenging, though, as margins may need to be sacrificed.

Inflation: The Bigger They Are, the Harder They Fall

The latest inflation data looked alarming at first glance because headline consumer price inflation (CPI) jumped sharply in March due to energy prices following the Middle East conflict. However, it is crucial to remember that inflation is a rate of change rather than a permanent price level. If energy prices simply stop rising, headline inflation will begin to fall on its own as the mathematical comparison to the previous month’s price becomes more favorable. Since core inflation remains subdued and shelter costs continue to cool, this situation looks more like a temporary energy shock than a second wave of persistent inflation.

Policy: Rallying Around a Pause

The threats to growth from a pressured consumer alongside inflation risks from energy price spikes helps explain why the Federal Reserve is likely to remain on hold for a while. Even critics who have argued for rapid rate cuts appear sympathetic to the idea that easing may need to be delayed. Cutting rates immediately after an energy-driven inflation jump, even to cushion growth, would be a poor look for a central bank still working to rebuild credibility after misjudging the 2021–2022 inflation surge. There is broad consensus among policymakers that energy shocks should be “looked through” rather than hastily “reacted to.” A pause gives the Fed time to assess whether higher energy costs bleed into the broader economy or remain contained.

Looking Ahead: Too Soon?

Bull markets are said to “climb a wall of worry,” but the market scaled this latest wall remarkably quickly. It’s not unusual for investors to price in success well before it is secured. Markets aren’t omniscient, and when optimism runs ahead of the data, it can leave prices vulnerable to pullbacks. Economic aftershocks often take time to surface, so a few more jump-scares along the way wouldn’t be surprising. Markets are sometimes too quick to declare an all-clear before the full impact of recent disruptions has worked its way through the system. Patience is a virtue in life and in investing.

*(Note: this is not a recommendation for or against investing in the stock, it’s just a set of observations about the news)