[chartist kao]

There has been no shortage of market drama this year. Real pain has been inflicted. Pessimism is proliferating. Uncertainty abounds. The breathtaking returns fueled by post-Covid enthusiasm have been drained from stocks as a bear market has taken hold.

The drama is understandable. Instability grips the world as the pandemic lingers, inflation swells, violence against Ukraine rages, an energy crisis looms and China shelters. The supply-chain bottlenecks that were expected to have straightened themselves out remain entangled. U.S. consumers are still buying, but their confidence is falling, as prices and escalating wages remain largely unaffected by the interest-rate increases meant to contain them. Corporate earnings expectations are beginning the painful reset to reflect today’s economic reality.

Meanwhile, most U.S. executives have little to no experience managing inflation, which has been subdued for 40 years. Even the Federal Reserve is new to this challenge. Despite the Fed’s intensifying policy efforts, inflation is hard to tame with quick fixes. Plus, the Fed hasn’t practiced many “perfect landings” when it comes to managing money supply.