What people say about growth and inflation doesn’t matter much anymore – even as the latest consumer inflation report shows a cooling trend. Rather, the markets are saying it all. Stocks are struggling, albeit at a seasonally weak time of year. But the nature of the decline – where big tech names, cyclical and consumer discretionary stocks are falling while consumer staples, utilities and other rate-sensitive sectors hold up – is a big tell as to where investors think both the domestic and global economies are headed. Treasury yields are dropping like a stone and commodities are crashing, especially energy prices, which directly affect consumers’ pocketbooks. That means a notable drop in both wholesale and consumer prices is coming down the road. Indeed, the 12-month rate for the consumer price index came in at 2.5% in August, the lowest since early 2021. Then there’s the deflationary pressure that’s ripping through China. We have all the ingredients for a disinflationary, if not mildly recessionary, environment among the world’s major economies. Rate-cutting season has begun elsewhere on the planet, but the U.S. is now behind the curve after leading the inflation fight. At least to date, our nation has won the battle, slaying the inflation dragon without sacrificing economic growth. Now, it appears that the U.S. is slipping behind the rest of the world, turning its policy actions toward growth risks rather than inflation risks. Influences on economic activity The Federal Reserve may have done a backdoor easing of sorts this week: A top official at the central bank revealed changes to a proposed set of U.S. banking regulations that would reduce a planned increase in the extra capital the largest institutions will be required to hold. This limits the risk that banks will be hamstrung in their lending efforts if the economy were to soften, and businesses required extra credit. The move is viewed as a big victory for banks, but it could be a reasonable win for the economy in the longer run. However, that’s just one factor among many facing the economy in the coming year. The battle between presidential candidates may also play a role in how economic activity unfolds next year. Since the end of the pandemic, fiscal policy has been wildly stimulative while monetary policy has been quite tight. We could see a reversal of influences on the economy, resulting in somewhat tighter fiscal policy due to both presidential candidates’ proposed policies and the growing debt service burden. A friendlier Fed and easier monetary policy may help offset that. We’ll see. In any event, the remainder of 2024 doesn’t look much different from the first seven months of the year, or from all of 2023 for that matter. Next year could be a different animal altogether. Markets tend to look ahead, not through a rear-view mirror. That suggests that the difficulties we see on Wall Street today could turn into difficulties on Main Street tomorrow. Risks are growing One of the Fed’s jobs – at least implied by its dual mandate to maintain stable prices and maximum sustainable employment – is to ensure that financial instability does not affect either. We’re not there yet. Still, the market seems to be correcting, and bond yields, commodities, inflation expectations and recent weakness in the value of the U.S. dollar all imply mounting risks. It’s also important to remind Fed policymakers that there is ample evidence of slower consumer spending among middle-to-lower income families. Further, recent revisions to job growth in the 12-month period through March 2024 confirm that a soft landing is at risk. Markets suffer first. The economy suffers some months later – if policymakers are looking backward and not ahead. A quarter-point rate cut from the Fed on Sept. 18 will confirm that central bank policymakers have yet to face forward and confront the problems ahead, instead of worrying about risks that have already receded. — CNBC contributor Ron Insana is CEO of iFi.AI, an artificial intelligence fintech firm.