Reaping the Whirlwind: A September 2022 Inflation Update

This article analyzes the macroeconomic impacts of unexpected inflation in 2022, examining how rising inflation expectations have driven interest rates higher, increased risk premiums across asset classes, and created valuation challenges for equities. The author presents a detailed assessment of inflation's first, second, and third-order effects on markets, interest rates, currency markets, risk capital availability, and corporate earnings, concluding that the S&P 500 is mildly overvalued under current conditions.