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The Big Take

Getting Inflation Right Is a Make-or-Break Moment on Wall Street

For a generation of investing pros, stable prices were a fact of life. What do you do when the old assumptions stop making sense?
On the floor of the New York Stock Exchange.

On the floor of the New York Stock Exchange.

Photographer: Bloomberg

God help whoever on Wall Street botches the inflation call.

After a three-decade hiatus, anxiety about rising consumer prices is testing the analytical skills of money managers and professional traders like nothing since the short-lived pandemic panic. The stakes couldn’t be higher: The long regime of mild inflation and low interest rates has helped to drive up stock and bond valuations. Now, with inflation unexpectedly hitting 6.2% in October from a year earlier, something new is on the horizon. A daisy chain of supply bottlenecks has driven prices higher as companies fight to guard their profits and consumer demand remains high. Is it a post-pandemic blip that will resolve itself? Or a sign of more turbulence to come?