High inflation? A generation of investors has never felt it

NEW YORK (AP) — The central question gripping Wall Street is whether the burst of inflation hitting the economy as it recovers from the pandemic is just temporary or the start of a real problem. The answer threatens to crack the stock market’s incredible, record-setting run that began in March 2020.

Adding to the fog of the debate — and the uncertainty that has markets churning — is that more than a generation has passed on Wall Street since investors had any experience at all with high, long-lasting inflation.

What's clear is that the average cost of regular gasoline has jumped to $3.04 per gallon from $1.89 a year earlier. Used cars and trucks cost 21% more last month than a year before. Airline fares ascended nearly 10%.

Many economists, as well as the Federal Reserve, say not to worry about any of this. They're convinced these fast price gains will prove fleeting. If the experts are wrong, however — remember last month's jobs data, where economists' predictions were wildly off the mark? — it could ravage the economy and force the Fed to reverse its record-low interest rate policy and trim the bond purchases that are boosting markets.

That possibility has led to some jagged moves in the stock market. The S&P 500 slumped 2.1% in one day last week after a report showed the Consumer Price Index rose at the fastest pace since 2008 in the year through May.

The difficulty is that the last time very high, long-lasting inflation was a serious threat for the economy was before many of today's professional money managers were born. To have had experience in such a market, they need to remember the 1970s and early 1980s, when inflation remained stubbornly above 10%.

“Certainly, having gone through that, it’s helpful,” said Rich Weiss, a 61-year-old senior portfolio...