“Davidson” submits:
Below is a chart of the SP500 Index and that of Barclay’s Intermediate Term Corporate Bond and Long Term Corporate Bond Indices. The simple answer to which did better was bonds. This because 1) when investors panicked they sold stocks and went to bonds thus keeping values high/yields lower than the rate of inflation and 2) bonds have maturity dates on which principal is returned. Bonds preserved value.
Stocks’ response to inflation was to fall till the earnings yield rose to compensate.
During the ‘70’s stocks earnings yields rose to 14% causing stocks to fall from the 20 P/E level of the ‘60’s to 7 P/E. This equated to a 67% decline in valuation and thus stocks under-performed bonds throughout the ‘70’s. See chart.
Disclosure (“none” means no position):