investors are preparing for the release of a us consumerprice index that may show no meaningful letup in inflation leaving few safe places to hide just as systemic risks may be growing  coming just a few days after silicon valley bank’s woes overshadowed friday’s robust jobs report the february consumerprice index report on tuesday will put the focus squarely back on inflation inflation traders expect to see a 6 yearoveryear headline cpi rate for february following january’s 64 reading and december’s 65 level even the narrower reading that strips out volatile food and energy costs may be a problem researchers at barclays said the core reading should come in around 04 on a monthly basis and 55 year over year little changed since january’s data  that’s likely to add up to an environment in which investors will need to rely on lesstraditional asset classes than ever before when the us suffered through stagflation in the 1970s characterized by slow growth and persistent price gains the most important takeaway for investors was that high inflation was uniformly bad across multiple countries for both stocks and bonds which had a harder time generating positive real or inflationadjusted returns according to deutsche bank researchers henry allen and jim reid meanwhile regionalbank problems are further clouding the picture by raising fears of systemic risks at a time when the federal reserve has turned more resolute about raising interest rates many market participants are clinging to the hope of a less aggressive fed rate hike on march 22 and policy path for the rest of the year meanwhile the counterargument is being made that the central bank won’t be dissuaded by the sound of something breaking a colloquial characterization of any damage done by the fed’s full year of rate hikes  read 10 banks that may face trouble in the wake of the svb financial group debacle  silicon valley bank’s problems “complicate things by making it really hard to get a read on financial conditions and by making a policy error more likely” said derek tang an economist at monetary policy analytics in washington still “fed policy makers are not in a position to preempt a financial crisis when inflation is so high they just don’t have that luxury” see silicon valley bank is a reminder that ‘things tend to break’ when fed hikes rates while the impact of the past year’s rate hikes should already be working through the us economy tang said via phone “the other part of the story is that maybe the rate hikes so far are not enough to go against what is stronger morelasting inflation” if the us is indeed caught in a 1970sstyle era of stagflation cash and commodities such as iron used in construction would be among the most desirable assets for investors to hold he said what makes the prospect of another 6level cpi reading so nerveracking is the fresh uncertainty it could throw into financial markets over where the fed needs to go with interest rates though policy makers prefer the pce index and lessvolatile core readings the annual headline cpi rate matters because of its impact on household expectations it’s been consistently above 6 since october 2021 though down from its peak of 91 last june  theoretically another 6level annual headline cpi reading has the potential to boost the likelihood of a 50basispoint fed rate hike on march 22 it could also lead traders to price in a greater likelihood that rates will peak around 6 in 2023 and borrowing costs will need to stay elevated for one to two years   according to thomas mathews senior markets economist at capital economics the fed wants to avoid a repeat of the “stopgo” monetarypolicy approach it took in the 1970s when the central bank switch repeatedly switched between tightening and loosening financial conditions  back in the 1970s the sp 500 spx produced an average nominal return of 6 on an annualized basis for the whole decade though the index was down by 1 a year in real terms according to deutsche bank treasurys “suffered too” with nominal returns also wiped out by inflation said researchers allen and reid who described the decade as one of the worst ever for major assets  one index produced by the bank which looks at more than a dozen developedmarket bond and equity percentile valuations reached its lowest level since 1800 by the end of the 1970s read ‘real wealth destruction’ this deutsche bank chart shows what could happen to assets in a repeat of the stagflationary 1970s  over the past week financial markets have toggled back and forth between pricing in the prospects of higher interest rates reinforced by two days of testimony by federal reserve chairman jerome powell and gauging the damage caused by the central bank’s hikes thus far the closure of silicon valley bank has put a focus on the toll of higher rates and placed a cloud over other banks  on friday the policysensitive 2year treasury rate tmubmusd02y had its biggest oneday drop since 2008 as investors flocked to the safety of government debt traders boosted the likelihood of a lessaggressive quarterpoint rate hike later this month which would take the fedfunds rate target to between 475 and 5 from a current level of 45 and 475 all three major us stock indexes djia spx comp finished lower and posted their worst week of 2023  tuesday’s cpi report for february is perhaps the most important data for the week ahead no major data is scheduled for monday on tuesday the nfib small business optimism index is due ahead of the cpi report check out marketwatch economic calendar  the february producerprice index is due on wednesday along with data on retail sales the new york fed’s empire state manufacturing survey and us home builders’ confidence   thursday’s data releases are made up of weekly jobless claims housing starts building permits and the philadelphia fed’s manufacturing survey on friday updates roll in on industrial production capacity utilization the conference board’s us leading economic index and the university of michigan’s consumersentiment index