According to the American Farm Bureau, this year’s Thanksgiving dinner cost 14% more than last year’s and was 9% more than in 2019.

Blame that on supply chain disruptions, higher packaging and transportation costs, worker shortages, those 100-plus ships anchored offshore California, rising energy prices, etc. Inflation may be the word of the year.

Fed chief Powell admitted that inflation may not be, as he said, transitory after all. It could remain stubbornly high for longer than expected. It could even get worse, he said.

Stubbornly high inflation is the number one worry of Wharton’s Jeremy Siegel. His reasoning: rising inflation would force the Fed to raise interest rates sooner than expected and to a higher level.

Rising inflation (and rates) reduces the present value of the future stream of earnings. That’s not good for stocks. Rising inflation reduces the present value of future interest streams. That’s not good for bonds. Inflation is a cruel tax that falls mostly on the middle class who feel it in stores and at the pump. It is also the ultimate enemy of the markets.

For the Fed, one complicating factor is that half of our publicly held federal debt matures in the next three years and needs to be rolled over. If it is rolled over at much higher rates the deficit would be even bigger, if that’s imaginable. Expect the White House to lean on the Fed to keep rates down.

I’ve said I’m giving Fed chief Powell the benefit of the doubt about the year’s high inflation numbers being transitory. But given the surge in prices across a wide spectrum, the growth of the money supply and increased government spending, inflation could be tenacious, much as we saw in the 1970s when we first heard the word “stagflation,” a condition that for years undermined both the economy and the stock market. While in early 2020 when the economy was all but shut down there were reasons for extreme monetary measures and the Fed’s massive bond buying, now the economy is in much better shape. Still, the extreme measures (monetary and fiscal) continue. End them.

Bottom line: Inflation will drive interest rates higher, but not to the extent that bonds will pose serious competition to stocks with growth stories and attractive yields. At least not soon. Much of an estimated $3.5 trillion on the sidelines will go to financial assets. Among all investment choices, stocks will still look best. That has been true for years.

David Vomund is an Incline Village-based Independent Investment Advisor. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.