Historical data show that stocks tend to post strong performances during periods of rising interest rates but only below-average results when inflation is rising or above average.
This counterintuitive dynamic was explained by Warren Buffett in 1977 in “Why Inflation Swindles the Equity Investor,” which he wrote as the U.S. was experiencing some of the worst price increases in its history.
Buffett showed that inflation can wreak havoc on bond investors because it causes their periodic income payments to depreciate over time. But he said stocks are more like bonds than most investors realize.
The main reason, I believe, is that stocks, in economic substance, are really very similar to bonds.