Inflation in America is no longer a problem. That’s the story line that dominated financial markets during the final two months of 2023. Bond yields tumbled as their prices rose (see chart), and stocks enjoyed a powerful nine-week rally – an equal weighted S&P 500 index rose 18 percent in just nine weeks. The markets’ price action was stunning to watch. All it took was a couple of months of surprisingly sedate inflation data, and maybe the fact that (a) the financial media is plagued by recency bias and (b) much of the current citizenry of the investment industry believes that two percent inflation is the norm in America (it is after all, the only environment they have worked in) to get the bells on Wall Street loudly clanging ding, dong, inflation’s dead!
Ding Dong, Inflation’s Dead…or is it?
by Douglas Cliggott