Cap-Weighted Equity Indexes are About to Have a Moment

The return of inflation has altered the investing landscape in a way last seen more than half a century ago.

The last time inflation and bond yields pivoted higher as they have over the past several years, Lyndon Johnson was president, McChesney Martin was chairman of the Federal Reserve, and the U.S. dollar was still officially tethered to gold.

Core CPI

Investing in a more inflationary market environment is an exercise in knowing which parts of investing dogma and lore to hold onto, and which parts to let go in favor of a more informed approach.

The initial education from the secular pivot in 2022 was deeply felt by the traditional 60/40 portfolio of stocks and bonds; at its lowest point a year ago, a diversified portfolio of stocks and bonds had lost a quarter of its value in just nine months, with both stocks and bonds declining in tandem.