MW Here's how strong the S&P 500 performs when inflation is falling rather than rising

By Jules Rimmer

More timely and measures of inflation point to lower for longer rates

There are more timely, accurate and comprehensive inflation surveys than the one conducted by the BLS

A new piece of research shows just how well U.S. stocks rise when inflation is receding rather than accelerating.

Over the last 50 years, the S&P 500 has returned 18.5% on average when the consumer price index growth rate was falling, as it is now. Last week's 2.4% year-over-year inflation print is positive for equities because it extends the economic cycle by delaying the eventual tightening of monetary policy.

This observation was made by the hedge fund Zweig-DiMenna's chief investment officer Michael Schaus and portfolio manager Matthew Finkelstein in a research note published Tuesday. They contrast the present inflation dynamics with periods when CPI was below 4% and rising. and the performance of the S&P 500 SPX was a more pedestrian 8.5%.

Lending weight to their argument Zweig-DiMenna also cites data from Truflation, a private, real-time measurement of U.S. inflation as opposed to the official CPI produced by the Bureau of Labor and Statistics. This methodology uses 13 million data points from a range of sources including the likes of Amazon (AMZN) and Walmart $(WMT)$.

This survey, Schaus and Finkelstein argue, is faster, more comprehensive and more accurate, utilizing daily rather than monthly inputs, a wider range of reference points and a more realistic assessment of housing expense. The note observes that Truflation consistently led CPI higher in 2021 and lower in 2022 and its efficacy is such that it may eventually negate the whole point of CPI in the first place.

The analysts point out that today, Truflation's reading is just 0.7% year over year inflation, well below January's official 2.4%. If this is the case, the authors contend then "the economic cycle and bull market have much farther to run before monetary conditions tighten."

Their global macro fund returned 9.6% last year, and is off to a hot start in January with a 4.6% gain.

-Jules Rimmer

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 18, 2026 05:06 ET (10:06 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.