Just as the markets were settling into the idea that the Fed's rate cut cycle is complete, we're now grappling with the possibility of a rate hike in response to prolonged inflationary pressures. In this week's column, I'm going to employ our visual approach to investing and try to determine whether the sharp rally in growth stocks — and the broader market in general — is on borrowed time due to elevated pricing pressures, and whether we need to become defensive in our portfolios. Recent consumer price index and producer price index readings were elevated, confirming the inflationary pressures from the geopolitical shock of the Iran war. It wasn't only energy boosting the numbers, however: the core readings, excluding food and energy, were also elevated, partly due to a re-acceleration in housing costs. CME Group fed funds futures show that just three weeks ago, there was almost no chance of a quarter percentage point hike to a range of 3.75–4.00% from the current target range of 3.50–3.75% by year-end. Today, that chance has elevated to 50-50 at the October meeting, and a 79% chance of a quarter-point hike by December. Could the market handle not only the end of the easing cycle, but a small hike in rates in response to lingering inflationary pressures? I believe it could, and a trusted research source of mine, Ed Yardeni, agrees as well . But there's a lot of time between now and a possible first rate hike, and a lot of room for market volatility as investors weigh this new reality. To set the tone using a visual element of inflationary pressures, here's a monthly chart going back 13-years of West Texas Intermediate crude oil and 2-year expected inflation from the Cleveland Fed. The correlation since 2015 is unmistakable; higher energy prices equal higher expected inflation. Higher expected inflation puts the Fed in tightening mode and equities on their heels. Look at the massive spike in 2022. I'm going to lean on the market history of 2022 to try to understand where we are today and what may lie ahead. ( Here's where it gets a little tricky to follow along with pretty annotated charts and words (much easier to describe in our weekly investor video update). Notice in March '22 the inflationary spike in reaction to the unprecedented fiscal and monetary policy stimulus following the global pandemic. The expected inflationary reading and prior chart resistance high from 2018 of 2.43% was broken! Notice the green and orange lines that did not yet break the equivalent 2018 highs. The orange line is the U.S. 2 year Treasury yield that at the time was yielding 2.30%, well below the 2018 highs, and even further below the same 2018 highs is the fed funds rate shown in green. It wasn't until the summer of 2022 that the 2 year note yield caught up to the 2-year expected inflation (orange line catches UP to green line), and next, the Fed catching up to the 2 year U.S. yield and closing the massive gap between the two with 425 bps of hikes in 2022. Fast forward to the hard right edge of the chart, and see that despite CME futures suggesting a rate hike is on the table 7 months from now, using our visual approach to investing, I see the Cleveland Fed 2-year expected inflation well below the 2022 high. Remember it was this line that led the inflation trade and the Fed to assume a hawkish position with catch up trades in 2 year Treasury yields and Fed funds rate. The breakout in expected inflation has not yet happened and using 2022 as a template, I don't see a huge need for U.S. 2 year yields and especially fed funds rates to move significantly higher. Keeping the 2-year expected inflation on the lower panel of the next chart, let's add in the growth trade relative to value ratio (VUG/VTV) in teal and the Nasdaq-100 in orange. The Nasdaq is ripping ahead, led by hardware and semiconductors, but the growth/value ratio (VUG/VTV) is showing a moderate divergence creating a minor warning flag for a continuation of the growth trade. If expected 2-year inflation were to remain below the 2022 highs of 2.98% due mostly to a de-escalation of Middle Eastern tensions, I see little reason to expect rate hikes in 2026 to materialize and expect the growth trade to power ahead. The next chart shows just how powerfully setup the growth trade actually is. Below is a 54-year chart of the Nasdaq Composite/S & P 500 ratio. The Nasdaq/S & P ratio tried 3 times to break through the 3.55 resistance first in 2000, again in 2022, and now a third time in 2026. On a technical basis, when a market tries to defeat a support or resistance level three times or more, this level is often going to fail. To my eye, the market has been quietly moving higher since 2022, poised and coiled like a spring ready to explode through this 54-year level — paving the way for continued gains in the AI-led growth trade and the broader U.S. stock market that better represents all 11 sectors of the economy. If we can get a little more clarity on expected inflationary pressures, and the Fed's resulting monetary policy stance turns less hawkish, it's our belief that significantly more capital will flow into the AI growth trade, powering the ratio to new all-time highs. However, we're active/visual investors, and if our outlook does not materialize and expected inflation does continue to climb, we'll take similar defensive measures for our investor portfolios as we did in 2022. — Todd Gordon, Founder of Inside Edge Capital, LLC (DISCLOSURES: None) We offer active portfolio management and financial planning for retail investors, as well as regular market updates like the idea presented above at www.InsideEdgeCapital.com/CNBC Charts shown are TradingView All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. 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