Inflation Fears Surge Among Portfolio Managers Ahead of 2026, Driven by Commodities and Policy Uncertainty

Portfolio managers across major U.S. asset management firms are quietly revising their outlooks for 2026, citing an unexpected uptick in inflation risks. The shift comes amid a 14% year-over-year surge in the Bloomberg Commodity Index since late 2025, driven primarily by copper and lithium, which rose 23% and 18% respectively. These spikes reflect tightening supply chains and renewed demand from global green energy infrastructure projects. The concern extends beyond commodities. Geopolitical disruptions have disrupted critical shipping lanes, with Suez Canal transit delays increasing by 40% in Q4 2025—contributing to elevated freight costs. Simultaneously, legislative debates over the Federal Reserve’s autonomy have intensified, with proposed bills introducing mechanisms to override monetary policy decisions. While no legislation has passed, market participants now assign a 29% probability to policy interference by mid-2026, up from just 12% in early 2025. These factors converge to challenge the long-held expectation of disinflation. Inflation forecasts embedded in 10-year Treasury yields have risen from 2.1% at the start of 2025 to 3.4% as of January 2026. Similarly, the Chicago Fed’s Non-Discounted Inflation Expectations index climbed to 3.7%, its highest level since 2022. Traders are adjusting positions accordingly, with long-duration bond holdings down 11% quarter-over-quarter. The implications are wide-ranging. Fixed-income portfolios are seeing increased volatility, while equities in rate-sensitive sectors—especially real estate and utilities—have underperformed. Hedge funds are ramping up options hedges against inflation surprises, with VIX term structure spreads widening by 35% in December 2025.