" ahead as prices enter a period of volatility. That's bad news for stocks: High inflation raises costs for firms, weighing on profits. But falling inflation lowers prices that firms charge, which is also a negative for profits.
"We expect a squeeze on corporate margins if inflation stays high — and an even larger squeeze if it falls," the note added."So good economic news like falling inflation is not necessarily good news for markets."David Rosenberg, the head of Rosenberg Research, pointed to the Dow's recent 13-day winning streak, which was the longest since 1987.
Back then, the Dow gained 28% over a period of 13 days, Rosenberg noted, before the index then plummeted 19% in October later that year. He dismissed the current uptrend in stocks as another short-lived"FOMO-based" rally. "The giddiness was omnipresent as is the case today and the bears were laughed at … but look at how the year ended … FLAT!"And while markets have cheered falling inflation, that mean lower profits for businesses, which could also weigh on stocks, he warned. Inflation fell sharply during the early 1980s, early 2000s, and in 2008, he said, periods that recessions when the S&P 500 posted hefty losses.
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