It's been a tough start to the year for investors as this month's chart from Sundial Capital Research makes clear. The overwhelming majority of investment wealth in the U.S. is tied to stocks and bonds, and both have been broadly hit. Neither asset class has provided ballast to the other.
It's extremely rare to see both stocks and bonds in a pullback at the same time, defined as a 5 percent decline from a 52-week high. Starting late last week, the total return in the S&P 500 and Bloomberg U.S. Aggregate Bond Index were both more than 5 percent off their highs.
That's why rising inflation is seen as such a problem. As the Fed raises rates to slow the economy and thwart price increases, bond prices fall. At the same time, corporations are getting their margins squeezed by the increasing cost of inputs and wages, as well as the new higher cost of capital, so their prices fall. Double whammy.