Investors may have to wait until the Fed’s done tightening for equity market fortunes to change. History suggests that next bull market may not start until both inflation and valuations are again low.

Recent inflation is a poor forecaster of changes in treasury yields. Pronouncements of a break in long-term treasury yield trends based solely on inflation may be mistaken.

How inflation expectations are formed determines how firmly the Fed must react. If expectations respond to current inflation, they’re possibly “unanchored”—and this makes the Fed’s job harder. Unfortunately, we can’t yet say that expectations haven’t changed for the worse.