Inflation hammered the U.S. economy following the pandemic. Business closures led to supply chain disruptions, which evolved into an imbalance between supply and demand as the government issued trillions of dollars in stimulus payments. Simply put, too much money was chasing too few goods, something famed economist Milton Friedman once said was a recipe for Inflation.

Indeed, that mismatch drove consumer prices higher at a pace not seen in decades, forcing the Federal Reserve to respond in equal measure. Policymakers raised the federal funds rate -- a benchmark interest rate that influences other rates throughout the economy -- at its fastest pace since the early 1980s. By increasing the cost of borrowing, policymakers hoped to curb spending and cool inflation.

Yet the aggressive nature of those rate hikes worried Wall Street -- so much so that the S 500 (SNPINDEX: ^GSPC) slipped more than 19% last year, its worst annual decline since the Great Recession in 2008. But the index has rebounded sharply this year amid signs of economic resilience. Gross domestic product increased at a 5.2% rate in the third quarter, meaning the economy expanded more than twice as fast as the 20-year average.

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Source Fool.com