March 19, 2026
By Peter Bower
As long as it does not get wildly out of line, inflation is good for stock prices. Some inflation gives cover for companies to raise prices. Profit margins can be defended and even enhanced. Also, inflation provides an excuse to squeeze down internal costs, adding another means to increase profits. When inflation measurements continue to stay stubbornly above the Federal Reserve’s stated target, don’t cry for corporate America.
The Bull warned several times that inflation was not likely to come down easily. In a world that was retreating from globalization, dealing with aging populations and needing to spend more for defense, very low inflation and interest rates were not in the cards. Remember, 3% inflation has been closer to the actual long-term experience. Recent measures of inflation support the notion that inflation will continue to be sticky around current levels. Higher levels are more likely than lower inflation for the foreseeable future.
With 3% inflation, interest rates are not coming down. Current rates are not curtailing economic growth. They are historically reasonable and only seem high when compared to the unusually low rates when the Federal Reserve was trying to keep our economy from caving in during the pandemic. Companies can deal with these rates just fine. Stay steady my friends.
-The Lonely Bull
