Fed 'ought' to hike 50bps to keep 10-year yield from pushing past 5%: Strategist

• The Fed 'ought' to hike by 50 basis points to get ahead of inflation, rather than the expected 25 bps.
• A 25 bps hike is seen as insufficient, likely leading to further increases in long-end U.S. Treasury yields (10-year, 30-year).
• Investors are advised to favor short-duration fixed income (6-12 months), defensive equities (e.g., healthcare), and real assets (e.g., real estate, copper, gold) as hedges against inflation.

Komal Sri-Kumar argues the Fed 'ought' to hike rates by 50 basis points to effectively combat inflation and prevent 10-year Treasury yields from exceeding 5%. He anticipates a 25 bps hike, followed by an election-driven pause, leading to further increases in long-end bond yields due to persistent inflation drivers like oil prices and tariffs. He advises investors to favor short-duration fixed income, defensive equities, and real assets.