Equity markets pulled back again on Wednesday after the FOMC minutes revealed more risks than previously feared, and the minutes cited tight labor markets and higher-than-acceptable wage inflation, among other risks to inflation. The risks could lead to additional rate hikes not priced into equities. This sets up a situation in which the FOMC outlook darkens and puts additional weight on the market. In this scenario, the top reached by the S&P 500 is the highest level investors will see until later this year or next.

The risk is centered on the FOMC again, but the driver of that risk is oil. Oil prices retreated this week but remain uptrending and are on the verge of breaking out to new highs. The market is tilted in favor of higher prices, although the data has some volatility. The odds are high that oil prices will continue to trend higher through the end of the year and lift consumer-level inflation along with it.