(Bloomberg) -- Stock and bond markets are betting on a “magical scenario” where economic expansion continues even while the Federal Reserve raises rates to combat inflation, said Bridgewater Associates executive Karen Karniol-Tambour. 

“If you look at history, that looks pretty unlikely,” Karniol-Tambour, the firm’s co-chief investment officer for sustainability, said Thursday in a Bloomberg Television interview.

She recommended that investors buy Treasury inflation-protected securities as well as commodities to hedge against rising prices and said nominal bonds are the “worst possible thing” investors can hold. 

Last month, Karniol-Tambour said the Fed would struggle to contain inflation even if it decided to raise rates five times this year. The central bank hiked by a quarter of a point Wednesday and signaled it would raise rates at each of its six remaining meetings this year. 

She added that current economic and financial conditions echo those of the 1970s, when high inflation was coupled with a geopolitical shock. 

“It’s just not pleasant to be in the Fed’s shoes and tighten into an exogenous supply shock in commodities that has to do with geopolitical events,” she said.

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