Around Columbus Day, 1979, Paul Volcker, newly installed as head of the Federal Reserve, embarked on the crusade that made him a legend: a no-holds-barred campaign to beat back inflation. On Wall Street, it took the better part of three years to recover.
Four decades later, the parallels abound. With inflation approaching double-digits, Jerome Powell’s Fed is engaged in its most powerful monetary tightening campaign since Volcker’s time, raising rates in chunks as stocks and bonds reel. History’s message for markets is a sobering one. Recoveries take time when central banks are against you.