By Nicole Goodkind, CNN Business

Markets plunged on Thursday morning after red-hot inflation data raised fears on Wall Street that the Federal Reserve would continue hiking interest rates aggressively. Then, something strange happened.

Stocks staged a massive comeback. The Dow Jones Industrial Average surged 1,500 points from peak to trough and the S&P 500 posted its widest trading range since March 2020, ending the day up more than 2%.

The consumer price index, or CPI, rose 0.4% in September from the previous month, double the 0.2% estimate from analysts surveyed by Refinitiv. On an annual basis, inflation was up 8.2%.

The Fed can’t be happy about the report. In the minutes of the its September meeting, released on Wednesday, officials expressed concern about the “risk of significant adverse effects on the economic outlook” if inflation continues to accelerate.

So what explains the sharp divergence between markets and seemingly terrible inflation data? Investors could be betting that the stronger-than-expected inflation report means price increases are near their peak. The rollercoaster market illustrates how investors are desperately grasping for clues about what the Fed will do next.

In the meantime, unbridled inflation is hitting households hard, highlighting a disconnect between Wall Street and Main Street.

Americans lost half a trillion dollars in wealth in early 2022

Wealth dropping globally

Household wealth is on track for its first significant reduction since the financial crisis in 2008, according to a new report by financial services company Allianz.

Global assets are set to decline by more than 2% in 2022, Allianz reports. That means households, on average, will lose about a tenth of their wealth this year.

The report paints a bleak picture. The 2008 financial crisis was marked by a relatively quick turnaround, but the current outlook shows stagnant growth in the future. The average growth of financial assets is expected to be around 4.6% until 2025, compared with 10.4% over the last three years.

Russia’s war on Ukraine has obstructed the potential for a post-pandemic economic recovery, and increased food and energy scarcity. Inflation is rampant and central banks around the world are raising borrowing costs. Stock markets are likely to end the year in the red– 2021 “might have been the last year of the old ‘new normal’, with low interest rates and bullish stock markets,” wrote Allianz researchers.

Household debt, meanwhile, has been on the rise globally. “The context of rising interest rates and the higher cost of living could pose a risk to household balance sheets,” reported researchers.

The takeaway: Allianz calls these changes a “tectonic shift” in global wealth that will take years to recover from.

More inflation means higher interest rates, 75% chance of recession, says NCSU economist

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