So do we just assume a short term market drop and recovery? Is it impossible to experience considerable rising inflation, the paradigm change that dalio suggests is possible
New investors like me need to know this stuff whereas old timers don't really care lol
B
In the long term the returns of stocks are resilient to inflation. Imagine if we experienced 100% inflation of salaries and prices this morning.
First, in nominal terms you and I would suddenly need twice as many (nominal) dollars to support ourselves.
At the same time, in nominal dollars every company's expenses would double.
However, those company's revenue and profits would also double.
Ultimately both stock prices and dividend payments would also double so we'd be able to meet our doubled spending needs.
The adjustment period isn't a lot of fun. Look at the 1970s. But it is survivable as long as your net worth isn't tied up in bonds.
To find stronger examples of inflation than the 1970s you have to look outside the US. These are also, in principle, survivable, but the problem is that once you start to get into examples of hyperinflation this can often become a sign of a failing government (see Weimar Republic), which is NOT a survivable situation
either as a FIREee or a person still bringing in a paycheck. So I put government collapse, either associated with hyperinflation or other factors, in the same category as having a major war fought on your country's soil, which, as Radagast points out above, is going to be a major lifestyle disruption regardless of ones planned withdrawal rate or whether one is retired or continuing to work.