Quote Originally Posted by jk View Post
i've been following luke gromen's commentary for a while. he has the same scenario, and expects it to benefit equities as well as gold. he's also a fan of btc, a belief i don't share. he points to the wwii period and thereafter as our closest analogue. huge gov't debt, the fed pinned interest rates including pinning the 10yr at 2.50. inflation rose markedly. equities almost kept up, bonds were killed in terms of real value.
I don't think the post WWII era is a great analog for U.S. stocks in the current era. Stocks started out the post WWII era with low profit margins and low valuation ratios. Earnings rose during that period and equity valuations rose too, so the U.S. stock market was a good place to invest. If inflation picks up going forward, I think it will be difficult for S&P earnings to rise because record profit margins should compress and valuation ratios should compress too. Luke is counting on a manufacturing resurgence, but if he's correct, profit margins and P/E ratios are far lower in manufacturing industries than in the tech companies that are such a large weight in the market today. I think Luke is right about a lot of things, but I doubt U.S. stocks will do a great job of preserving or growing anyone's capital in real terms in a high inflation environment.