> Also, what happens if the Fed doesn’t stamp out inflation in that case? Wouldn’t that force people to buy equities like crazy? At a very rough level, no. Sto

> Also, what happens if the Fed doesn’t stamp out inflation in that case? Wouldn’t that force people to buy equities like crazy? At a very rough level, no. Stocks are valued based on discounted cash flow (in general and over the long term. Plenty of short-term exceptions, i.e. Tesla future earnings costing 18x more than Fords future earnings). A higher interest rate, i.e. inflation, lowers the value of those future earnings. Stock prices today represent an extreme historical outlier in terms of the price people are paying for future earnings. This might make sense if we assume low inflation for the next 30 years. It does not make sense in a high inflation scenario. Reasonable scenarios allow the market to fall another 30-50% over the next year or two. Reasonable scenarios allow the markets in 10 years to be roughly where they are today in absolute terms (i.e. before adjusting for inflation).