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%.