When two pieces of bad news arrive in sequence, investors experience something the behavioural finance literature calls the availability cascade: each new data point makes the prior one more vivid, the trend feels increasingly inevitable, and the case for action feels increasingly overwhelming. U.S. CPI came in at 3.8% on Tuesday. U.S. PPI came in at 6.0% year-over-year on Wednesday. For an investor who lived through 2022, this sequence carries a specific emotional charge that the numbers alone do not fully explain.
Daniel Kahneman and Amos Tversky's 1973 work on the availability heuristic identified exactly this phenomenon: people estimate the probability of a future event based on how easily examples come to mind. After two consecutive inflation surprises, a third feels not merely possible but likely. After the experience of watching transient inflation become persistent inflation in 2021, a similar sequence of prints feels like early warning of a replay. The problem is that two data points are not a trend, and the current inflation episode has a structurally different cause from the one that ended in restrictive monetary policy and a painful portfolio reset.
The Architecture of the Current Anxiety
The U.S. PPI print that arrived Wednesday was genuinely alarming in its magnitude. Final demand prices rose 1.4% in April alone, nearly triple the 0.5% consensus forecast, and the year-over-year rate at 6.0% is the highest reading since December 2022. That number will travel through financial media for days, and it will feel, to a client who scans headlines, like confirmation of something they already feared.
The chart above shows U.S. PPI year-over-year from January 2021 through April 2026, with the current Iran war shock period marked against the 2021-2022 structural inflation cycle.
The April 2026 PPI reading of 6.0% year-over-year is the highest since December 2022, but the chart illustrates a critical structural difference: the current spike is concentrated in a brief supply-shock window tied to the Iran war, whereas the 2021-2022 cycle sustained double-digit readings for fourteen consecutive months. Source: U.S. Bureau of Labor Statistics.
What makes the current situation behaviourally dangerous is not that the numbers are alarming, but that they are alarming in a sequence that rhymes with a prior traumatic experience. Terrance Odean and Brad Barber's 1999 research on individual investor trading behaviour established that investors trade most actively, and most destructively, precisely when information flow is highest. Two major data releases in 48 hours, both above consensus, constitute exactly the kind of information environment that drives reactive portfolio decisions.
Why the Pattern-Match to 2022 Is Misleading
The 2021-2022 inflation cycle was demand-driven and supply-constrained simultaneously: fiscal stimulus had flooded the economy with purchasing power precisely when global supply chains were fractured. The Federal Reserve held rates near zero for eighteen months into that dynamic before beginning one of the most aggressive tightening cycles in its history. The damage to balanced portfolios was severe and prolonged.
The 2026 inflation episode has a different architecture. It is an energy supply shock caused by a specific, identifiable, and in principle resolvable geopolitical event: the closure of the Strait of Hormuz beginning in late February. The Bank of Canada's April 29 Monetary Policy Report acknowledged this directly, noting that "so far, there is little evidence that higher oil prices have fed through to other goods and services prices more broadly." Long-term inflation expectations in Canada remain anchored. The IEA has characterized the disruption as the largest single supply event in the history of the oil market, but supply shocks, unlike demand shocks, carry the seeds of their own reversal: they end when the cause ends.
That distinction matters to the portfolio decision, but it does not feel that way when the data is arriving. Richard Thaler's work on mental accounting suggests that investors treat each data event as a discrete unit rather than as part of a longer pattern, which is exactly why sequential shocks feel more confirming than they analytically are. The investor who knows intellectually that this is a supply shock may still feel, viscerally, that it is 2022 again.
The Specific Population of At-Risk Clients
Not all clients are equally susceptible to the current environment. The availability heuristic operates most powerfully on those with vivid direct experience of the reference event. Clients who watched their balanced portfolios fall 15% to 20% in 2022 carry a specific emotional memory that the current data sequence is actively reactivating. Clients who are newer to investing, or who held heavily defensive portfolios through 2022, carry a different emotional baseline and are less likely to be pattern-matching to that episode.
Clients approaching or in early retirement are particularly vulnerable for a compounding reason: the combination of inflation anxiety and sequence-of-returns awareness creates a powerful motivation to reduce equity exposure at precisely the wrong moment. Daniel Kahneman's loss aversion finding, that losses are felt approximately twice as intensely as equivalent gains, means that the prospect of further inflation-driven market pressure feels far worse than the data alone would suggest it should.