Part 7/11:
A critical factor that ties together past market crashes is inflation. Historically, every notable bear market or crash has coincided with US inflation rising above 3.5%. Inflation exerts upward pressure on interest rates, constricting liquidity and leading to tighter monetary conditions that typically precipitate declines in asset prices.
During periods when inflation was high—such as 2022, 1999, and 1987—markets experienced swift downturns after prolonged rallies. Conversely, the 2020 pandemic-induced crash occurred with inflation still below 3%, underscoring inflation's central role in market crashes.