The 1970s was an outlier in another way. Higher inflation is more often associated with a strong economy than a weak one, which is one reason why the combination of high inflation and a weak economy during the 1970s is so memorable. It’s a mistake to learn too much from that experience. If inflation continues to run hot, it’s probably because the economy is strong, as it has been for much of the pandemic. And if the economy stumbles, inflation is likely to recede, removing the need for a long rate increase campaign.
So don’t assume the Fed’s plan to raise rates is bad for the stock market. There’s a better chance the market will shrug it off.
Nir Kaissar is a Bloomberg Opinion columnist covering the markets. He is the founder of Unison Advisors, an asset management firm. He has worked as a lawyer at Sullivan & Cromwell and a consultant at Ernst & Young.