[omalleyt]

There's something called the equity risk premium. This is essentially the extra rate of return investors want to get in order to hold stocks rather than Treasury bonds. When inflation is high, the yield on Treasury bonds goes up. This means that, for the same equity risk premium, investors require a higher rate of return from stocks. Rate of return is approximately E/P (i.e. the inverse of P/E). So therefore, P/E must go down.

This is called P/E compression. It's why stocks don't perform as well during inflationary periods as physical assets (such as gold, silver, real estate, etc.)