Inflation’s Magic Number Is Four

The story goes like this. When inflation is low, rising inflation is a good thing for stocks. 

As inflation rises further, the gains for stocks decrease, because deflation risk is forgotten and the prospect of a more active Fed counteracts the continued benefit from a stronger economy. 

The 4% logic isn’t written in stone, but it has reasonable historic support. Since the S&P 500 was created in 1957 U.S. inflation has risen above 4% nine times, and in eight of those cases stocks were lower three months later.

James Mackintosh WSJ May 18, 2021

https://www.wsj.com/articles/inflations-magic-number-is-four-11621355006