In thinking about the limits of fiscal policy, we should not be lulled into complacency by the U.S. economy's recent lack of inflation. There is a limit, a point at which fiscal expansion would trigger an inflation that would only be controllable through the use of unacceptable interventions. We may not know where that limit is—whether it will come in to play at a Debt-to-GDP ratio of 150%, 200%, 250%, 500%, 1,000%, 2,000%, 100,000%, and so on. But we can be sure that it exists somewhere, right now, as we embark on an effort to explore it.

Valuation acts in opposition to this process. If investors are sensitive to valuation, rising prices will reduce their desire to allocate to equities. But it's difficult for valuation to gain traction as a consideration in the current environment. The relevant value proposition that investors have to consider is an awkward proposition that pits positive-but-historically-depressed earnings yields in equities against zero yields in everything else. Rising equity valuations cannot easily shift the balance of that proposition for at least two reasons. First, equities can produce attractive returns even when purchased at elevated valuations, provided that they stay at those valuations—and in the current case, they very well might. Second, the alternative proposition—earning a negative real return for an indefinite period of time while others continue to make money--is simply unacceptable to many investors.
We refer to this logic as the logic of TINA—"There is No Alternative." The logic is sound, but it has limitations. Equities aren't going to rise to infinity—an earnings yield of zero--simply because the competition is yielding zero. As equities become more expensive, they become more "needy", more sensitive to declines in buyer enthusiasm. Their neediness and dependence on continued buyer enthusiasm increases their potential for inflicting losses.

TINA markets are guaranteed to be difficult and frustrating for large numbers of people. The problem of how to properly invest in them has no easy solution. Chasing ultra-expensive assets, nervously supervising them in the hopes that you haven't top-ticked them, is stressful and unpleasant. But so is waiting on the sidelines earning negative real returns while everyone else makes money. Time is not on your side in that effort.
Over time, as the COVID-19 deficits collect in the hands of savers, they will end up functioning as direct injections of cash and treasury bonds into investor portfolios. These injections, which will represent insertions of new wealth rather than alterations in the composition of existing wealth, will raise allocations to cash and treasury bonds and reduce allocations to every other asset class—most notably, equities.
Do investors actually want to have their allocations to equities reduced in this way, replaced on a percentage basis with cash and bonds? Probably not, especially with the Fed having just lowered interest rates to zero. But they don't have much choice in the matter; if they don't want to accept the reduced allocations, then their only available option, outside of investing in new companies or in companies that are diluting, will be to push up on the prices and valuations of existing shares.
....on the assumption that investors display zero sensitivity to valuation and invest entirely based on a pre-determined asset allocation preference, we can quantify the exact impact that the COVID-19 deficits would be expected to have on prices, if they found their way into markets. We simply assume that investors would bid up on the price of equity until their pre-pandemic allocation to equity was restored. To restore that allocation amid the COVID-19 debt issuance, the market would have to rise by roughly 18%, from its price at the time of the writing of this piece, roughly 3327, to a final price of roughly 3900, a forward 2-yr GAAP price-earnings ratio of 26 times.
In exploring the supply-driven effects that fiscal policy can have on asset prices and valuations, we've once again arrived at a classic upside-down outcome. An event occurs that damages the economy, forcing extreme issuance of zero-yield government debt, the presence of which pushes down on average equity allocations and up on equity prices and valuations, contrary to the assumed effect of the damage itself.

If you play with this chart:.......FLPSX,IJH,NAESX.....
https://stockcharts.com/freecharts/perf.php?FLPSX,IJH,NAESX
FLPSX performed well PRIOR to 2005 but after that, for the last 15 years, it has been an index hugger.

Check the duration on the bond sleeve and see if you feel comfortable with that going forward.
If the Fed is successful in raising the inflation rate will interest rates rise as well?
I don't plan to sell out. But I do take profits out every few year to put elsewhere.

Let me know when you see inflation. They are talking about it for several years while high tech is taking over and it will increase and this time it will take away higher paying jobs. The people who keep their salaries upgraded are the STEM ones.
Price competition decrease margins too. All I need is to google something I want to buy and find the best price online which means more actual stores will lose.

Q. HOW DID THE FUND PERFORM, JOEL?
A. The fund did well. For the 12 months that ended July 31, 1997, the fund returned 39.45%. This topped the small-cap funds average, as tracked by Lipper Analytical Services, which returned 31.96% over the same period, as well as the Russell 2000 Index, which had a 12-month return of 33.39% as of July 31, 1997.
Q. WHAT FACTORS INFLUENCED PERFORMANCE?
A. Stock prices rose faster than earnings for both large and small companies, but particularly for a concentrated group of gigantic companies such as General Electric and Coca-Cola. The fund holds mostly small companies, and it was frustrating that many small-cap stocks - which grew as fast and steadily as the household names - didn't enjoy similar stock performance. The good news is that small, steady growth stocks are typically cheaper than their larger counterparts and this should eventually result in better relative performance.