The Federal Reserve rarely raises interest rates just once. Following the recent hike, investors should prepare for further tightening, with another two quarter-point increases possible over the next four to six months.

For a market already confronting war in the Middle East, spiking oil prices and high Treasury yields, that prospect adds pressure. Higher borrowing and energy costs could squeeze household spending and eat into recently strong corporate profits.

The Fed is aware of these pressures. Car sales and housing, which depend on borrowing, have slowed down, while lower-income households are feeling the strain. Policymakers must weigh these challenges before deciding on more rate hikes.

Bond Markets Point To Growth, Not Inflation

Yet the bond market offers a more encouraging explanation for part of the rise in interest rates. Investors are anticipating stronger economic growth without becoming significantly more concerned about long-term inflation. That combination should give corporate profits room to keep growing.

Consider the 10-year inflation breakeven rate, a key measure derived from Treasury yields. It........

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