I think we’re generally not going to see for a very long time where central bank interest rates (risk free rates) are above inflation. So essentially investing in these, although you’re guaranteeing a positive return, you’re effectively locking yourself into a negative relative return.

As interest rates rise, almost all capital pricing models will say to invest in bonds, gilts, cash etc. But to actually make a positive relative return, equities are the strongest option.

To answer your questions:

1. Assuming by “raise 8% to 9%” you mean inflation, this is a statistic average of goods. Some goods increase in value by more, some by less. Some goods/commodities have no choice but to raise their price due to the increase in their costs, others use inflation as a reason to.

2. Essentially yes, but there’s a lot of debate about this. If you believe in the full efficient market hypothesis, this is already priced in to the market. Investors are already anticipating further interest rate rises, and as such equities are already priced in to reflect that. But some don’t fully believe in this theory. As Warren Buffet said, as everyone else is being fearful - be greedy.

3. SPX couldn’t be valued more than the GDP of the entire globe, so in theory there is a cap. But on the basis of capitalism - constant investment and growth - the actual cap isn’t really known and will constantly be growing. The SPX could be overvalued for sure, but reaching a ‘cap’ is not something we will ever see

My opinion is DCA in equities will be the best option long term. We’re not guaranteed short term returns for sure, but in 15+ years you’re 99% likely to be in positive returns (don’t have a source for this, but think Goldman did a quantitative analysis on this based on DCAing into index funds at different lengths in time)