Inflation means that falling stock prices are seen merely as a side effect of tighter monetary policy, not a reason to invoke the “Fed put” and rescue investors.
The common factor in the 20% drops was the Federal Reserve. Each time, the market bottomed out when the central bank eased monetary policy, with the stock market’s fall perhaps helping push the Fed to take the threats more seriously then it otherwise might.
Most important, in 1974 the Fed kept r...