Key Takeaways
- Median 12-month result after a rise in inflation of at least 2 points within a year: +3.8%, against +3.9% for all months, a gap of 0.1 percentage points below the all-months median.
- Higher in the 12 months after 32 of 37 episodes (86%), compared with 88% of all months.
- The range was wide: -9.3% after April 2021 to +12.8% after March 2000.
- Median over 3 months +0.9% (all months +0.9%); over 36 months +11.7% (all months +11.8%).
- Episodes overlap with recessions, policy changes and valuation swings, so the record shows what followed, not what the trigger caused.
What the Historical Record Shows
An episode is counted in the month the year-over-year CPI inflation rate is at least 2 percentage points higher than it was 12 months earlier. After one is counted, the next is counted only once 12 months have passed without the condition, so a long spell is one episode. The data run from January 1871 to September 2026, and 37 episodes have a full 12-month window.
Rising inflation usually prompts central banks to tighten policy and lifts the yields investors demand, and it raises costs for companies faster than some of them can raise prices.
| After the trigger | Episodes | Median | Average | Higher | All months: median | All months: higher |
|---|---|---|---|---|---|---|
| 3 months | 37 | +0.9% | +1.0% | 34 of 37 | +0.9% | 83% |
| 12 months | 37 | +3.8% | +3.2% | 32 of 37 | +3.9% | 88% |
| 36 months | 37 | +11.7% | +12.6% | 34 of 37 | +11.8% | 95% |
The comparison column uses every month in the record, whether or not a trigger had occurred. Dropping any one episode moves the 12-month median between +3.7% and +3.8%.
Every Episode
| Month | What changed | 3 months later | 12 months later | 36 months later |
|---|---|---|---|---|
| April 2021 | inflation 0.3% to 4.2% | +3.6% | -9.3% | -14.4% |
| December 2009 | inflation 0.1% to 2.7% | -0.1% | +6.1% | +26.1% |
| October 2007 | inflation 1.3% to 3.5% | +4.4% | +9.3% | +24.0% |
| September 2005 | inflation 2.5% to 4.7% | +1.4% | +2.6% | +20.3% |
| March 2000 | inflation 1.7% to 3.8% | +1.1% | +12.8% | +35.7% |
| April 1987 | inflation 1.6% to 3.8% | +1.1% | +5.6% | +28.1% |
| October 1978 | inflation 6.4% to 8.9% | +0.3% | -2.5% | +6.0% |
| May 1973 | inflation 3.2% to 5.5% | +0.4% | +2.5% | +17.2% |
| August 1968 | inflation 2.4% to 4.5% | -2.9% | -6.2% | +15.8% |
| November 1966 | inflation 1.6% to 3.8% | +3.6% | -1.6% | -3.6% |
| June 1956 | inflation -0.7% to 1.9% | -1.1% | -3.4% | -0.1% |
| July 1950 | inflation -2.9% to 1.7% | +0.1% | +1.1% | +4.0% |
| July 1946 | inflation 2.3% to 9.4% | +0.4% | +1.1% | +6.4% |
| May 1945 | inflation 0.0% to 2.3% | +1.0% | +3.0% | +6.3% |
| September 1939 | inflation -3.4% to 0.0% | +0.9% | +4.3% | +4.8% |
| March 1937 | inflation 0.0% to 3.6% | +0.9% | +3.9% | +12.4% |
| May 1933 | inflation -10.5% to -8.0% | +1.2% | +5.4% | +14.5% |
| June 1929 | inflation -2.8% to 0.0% | +1.5% | +4.5% | +10.4% |
| April 1928 | inflation -3.4% to -1.2% | +0.3% | +2.9% | +10.4% |
| June 1925 | inflation 0.0% to 2.9% | +1.3% | +6.0% | +13.8% |
The 20 most recent of 37 episodes since 1871, newest first. "Not yet" means the window has not finished.
Why the Result Differs From Episode to Episode
The return of a 10-year Treasury is its coupon income plus the price change caused by moves in yield. A bond with a modified duration near 8 loses roughly 8% of its price when its yield rises one point, and gains about as much when it falls one point; the coupon offsets part of any loss.
Prices are monthly averages of daily closes, so the figures are used only at horizons of three months or longer, and the series before 1913 splice earlier price indexes and are less precise. Results are nominal, before inflation, taxes and fees, and use the reference month of each statistic: inflation and unemployment figures were published after the month ended, so an investor reacting to the release would have started a few weeks later.
Triggers rarely occur alone. An inflation rise, a rate rise and a valuation fall can all begin within the same year, and a recession can start before or after any of them, so each episode mixes several influences and the average hides how different the individual cases were.
What to Watch
The indicators that define or accompany this trigger:
- CPI: Latest Reading, Historical Chart, Release Date & Investor Guide
- Core PCE: Latest Reading, Historical Chart, Release Date & Investor Guide
- 10-Year Breakeven Inflation: Latest Reading, Historical Chart, Release Date & Investor Guide
- Fed Funds Target Range: Latest Reading, Historical Chart, Release Date & Investor Guide
- 10-Year Real Yield: Latest Reading, Historical Chart, Release Date & Investor Guide
Frequently Asked Questions
What happened after the most recent episode?
The most recent episode with a full 12-month window began in April 2021 (inflation 0.3% to 4.2%). Over the next 12 months, a 10-year U.S. Treasury bond (coupon income included) returned -9.3%, against a median of +3.9% across all months.
How often did a 10-year Treasury bond end higher in the 12 months after a rise in inflation of at least 2 points within a year?
In 32 of 37 episodes (86%). Across all months since 1871, 88% of 12-month windows ended higher.
Is this a reliable signal for investing?
The record does not support treating it as one. The 12-month results ranged from -9.3% to +12.8%. Dropping any one episode moves the 12-month median between +3.7% and +3.8%. The episodes also overlap with other events that move markets. It describes what followed in the past, not what will follow.
How is the result measured?
An episode is counted in the month the year-over-year CPI inflation rate is at least 2 percentage points higher than it was 12 months earlier; the next is counted only after 12 months without the condition. Forward results are measured from that month over 3, 12 and 36 months using a 10-year U.S. Treasury bond (coupon income included). Prices are monthly averages of daily closes, so the figures are used only at horizons of three months or longer, and the series before 1913 splice earlier price indexes and are less precise. Results are nominal, before inflation, taxes and fees, and use the reference month of each statistic: inflation and unemployment figures were published after the month ended, so an investor reacting to the release would have started a few weeks later.