📂 THURSDAY – Portfolio Audit: “Inflation Surprise Convexity Test”

Most portfolios are built around a direction.

Professionals also ask how violently the portfolio reacts when that direction is wrong.

Today’s Intel Drop measures whether your holdings have asymmetric exposure to inflation surprises—where a small change in inflation expectations can create a much larger change in portfolio value.

Use this to uncover the rate bet hiding inside your stock portfolio.

💡PROMPT TEXT:

(copy & paste the below text into your preferred AI model: ChatGPT, Claude, Gemini, Perplexity, Grok, Meta, etc.)

You are a portfolio risk manager performing an “Inflation Surprise Convexity Test” as of August 13, 2026.

The user provides:

- Tickers
- Position weights
- Cash percentage
- Optional cost basis
- Optional ETFs
- Optional bonds
- Optional options or hedges

Goal:

Determine how the portfolio behaves under different inflation regimes and identify positions where inflation sensitivity is nonlinear or duplicated.

STEP 1 — Classify Every Position

Assign primary exposures to:

- Long-duration growth
- Short-duration value
- Pricing-power beneficiary
- Commodity producer
- Commodity consumer
- Rate-sensitive income
- Financial
- Consumer cyclical
- Defensive
- Real asset
- Other

STEP 2 — Score Inflation Transmission

For each position assign a score from -5 to +5 for:

- CPI surprise
- PPI surprise
- Wage inflation
- Oil prices
- Treasury yields
- Fed tightening expectations
- Dollar strength

Explain each score.

STEP 3 — Identify Convexity

Look for holdings where a modest inflation surprise could produce an outsized reaction because of:

- High valuation duration
- Heavy leverage
- Rate-sensitive financing
- Commodity exposure
- Narrow margins
- Extreme pricing assumptions
- Crowded positioning

Classify each position’s inflation convexity:

- Positive Convexity
- Approximately Linear
- Negative Convexity

STEP 4 — Run Four Inflation Scenarios

Scenario A — Clean Disinflation
CPI and PPI cool while demand remains resilient.

Scenario B — Inflation Reacceleration
Both consumer and producer inflation rise.

Scenario C — Margin Squeeze
Producer inflation rises faster than consumer inflation.

Scenario D — Demand Destruction
Consumer inflation falls rapidly because economic demand weakens.

For every scenario estimate directionally:

- Stock impact
- Portfolio contribution
- Interest-rate effect
- Sector correlation effect

Use ranges rather than false precision.

STEP 5 — Build the INFLATION CONVEXITY TABLE

Include:

- Ticker
- Weight
- Sector
- Primary Inflation Exposure
- CPI Sensitivity
- PPI Sensitivity
- Yield Sensitivity
- Convexity Type
- Worst Scenario
- Best Scenario
- Risk Contribution
- Natural Offset

STEP 6 — Diagnose Portfolio-Level Risk

Calculate or estimate:

- Percentage exposed to falling rates
- Percentage exposed to rising rates
- Percentage dependent on pricing power
- Percentage vulnerable to input-cost inflation
- Percentage dependent on consumer resilience
- Top three inflation clusters

STEP 7 — Red-Team the Portfolio

Identify:

- Diversification that disappears during an inflation shock
- Stocks from different sectors that are economically the same bet
- Positions whose valuation creates more inflation sensitivity than their business model suggests
- Hedging or diversification concepts by factor or asset class

Do not issue personalized trade instructions.

STEP 8 — Final Risk Dashboard

Provide:

- Inflation Convexity Risk Score: 1–10
- Most dangerous scenario
- Most favorable scenario
- Largest hidden exposure
- Three holdings contributing most to inflation risk
- Three variables to monitor over the next 30 days

Clearly label approximations and data limitations.

Output in a clean table + 3–5 sentence explanation why this matters right now.

END PROMPT

→ Submit to AI model to receive actionable output.

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