Equity markets advanced last week after cooler-than-expected inflation led the market to price in fewer rate hikes. The S&P 500 advanced 2.5% for the week and closed at a new 12-month high. The index is trending higher and may increase to a new all-time high by the end of the summer. The caveat is that inflation remains high relative to the Fed's target, and the committee remains on track for additional rate hikes.

The risk for the market is that inflation will cool and stabilize at a lower level but at a level still too hot for economic stability. In that scenario, the Fed could hike rates again later this year and put the base rate at 550 basis points or higher. That would push mortgage rates above 8.0% and cap demand for goods and services across industries and verticals. So, the market marches higher, but it may be headed for a hard ceiling and another deep correction.