Rationally viewing the relationship between inflation and the market, stable inflation ≠ bearish signal, excessively high inflation is the 'brake' of a bull market.

When it comes to inflation, many investors instinctively equate it with 'market bearishness,' but the reality is not absolute: higher inflation itself is not necessarily a bearish signal; the key lies in whether it is within a 'stable and moderate' range. This conclusion can be clearly supported by the correlation between year-on-year core CPI inflation and the Nasdaq Composite Index.

From the chart data, it can be seen that during the phase when inflation is steadily rising and has not broken through reasonable thresholds, year-on-year core CPI inflation and the Nasdaq Composite Index exhibit a synchronous upward trend. This means that moderate inflation does not suppress the vitality of the stock market. When prices rise moderately, it is often accompanied by the stable release of economic demand, and corporate profit expectations remain stable. The market does not need to panic due to 'out-of-control inflation' or 'strong policy tightening,' thus providing a natural basis for sustained upward movement in the stock market, allowing the bull market to gradually continue in such an environment.

What truly impacts a bull market is not the single phenomenon of 'inflation rising,' but rather the two extreme situations of 'excessively high inflation' or 'economic recession.' On one hand, if inflation breaks through the moderate range and enters an 'excessively high' state, it will directly trigger strong market expectations for tightening monetary policy. The Federal Reserve may suppress inflation through interest rate hikes and other means, which will raise market financing costs, compress corporate valuation space, and subsequently lead to capital withdrawal from the stock market, forcing an interruption of the bull market process; on the other hand, economic recession fundamentally weakens corporate profitability. Even if inflation is low, the stock market may fall due to deteriorating fundamentals, making a bull market naturally impossible to discuss.

Therefore, it can be seen that judging the impact of inflation on the market cannot be a simple 'one-size-fits-all' approach. Investors need to break free from the habitual thinking of 'inflation equals bearishness' and focus on the 'magnitude and stability' of inflation: as long as inflation remains within a reasonable range, there is no need to overly worry about its impact on the bull market; only when inflation spirals out of control or signs of economic recession appear should market correction risks be taken seriously. This rational perspective on the relationship between inflation and the market is crucial for grasping the rhythm of the bull market and avoiding key risks.