Inflation Isn’t the Stock Market’s Biggest Problem Now. Deflation Is.

Generationally high inflation was the story of 2022. That’s not going to be the story of 2023. The boogeyman of disinflation—and even some deflation—is about to become the biggest risk to stocks, and investors are going to have to figure out how to position portfolios for falling prices.

U.S. consumer prices rose 6.5% year over year in December, the sixth consecutive month the pace of pricing gains decelerated. Investors were pleased. The

S&P 500

gained 2.7% for the week. The

Dow Jones Industrial Average

gained 672 points, or 2%. The

Nasdaq Composite

was the big winner, closing up 4.8%.