Portfolio Strategy Chart of the Day

Research evidence excerpt

Portfolio Strategy Chart of the Day

May 14, 2026

Will Global Central Banks Make the Mistake of Tightening Policy into Higher Oil Prices?

Japanese Yen 50 Wolfe Research Central Bank Diffusion Index 170

40 Are we entering a new

30 tightening regime? 160

0 140

-10

-20 130

Intervention by

-30

Japanese government 120

-40

-50 110

90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26 22 23 24 25 26

• Although U.S. stock markets have blissfully shrugged off elevated oil prices, long-term bond yields and central bank expectations

(futures markets) have traded in lockstep with oil since the conflict in Iran began. We believe this divergence can best be explained

by the U.S.’s energy independence relative to the rest of the world. Said differently, higher energy prices are likely to have more of

a lasting impact on economic growth in Europe/Asia compared to the U.S., given their larger reliance on energy imports.

• After several key central banks have met over the course of the last month, we see potential for global central bank policy to

diverge from the Fed (global tightening vs. Fed holding/cutting). Most importantly, we’re watching the actions of the BOJ, as

growing dissents amongst members of the policy board at their last meeting (6-3 in favor of a hold) represented the largest

divide since Governor Ueda’s tenor started in 2023. Our sense is this rift may suggest growing pressure for the central bank to

raise rates — the key question remains by how much. If the BOJ was forced to respond more aggressively to sticky inflation

than futures markets are indicating (~2 hikes), a sharp strengthening of the Yen vs. Dollar could spur another carry trade

unwind or other commotion in the markets. We see central bank policy mistakes (tightening into transitory higher energy