Inflation: How Does it Affect Investment Stocks?
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- เผยแพร่เมื่อ 16 มิ.ย. 2024
- Inflation rates have been rising in big economies such as Brazil, Russia, the US and the UK throughout 2021. This will have a knock-on effect on the stockmarket, but some investment stocks may perform better than others.
Our in-depth article about investing during high inflation periods: bit.ly/3zYZye7
Some economists fear a return to high inflation, the likes of which has not been seen for more than 40 years. And since the start of 2021, it has been rising steadily across the world.
If inflation continues to rise, what effect will it have on the stockmarket and your wealth?
When covid-19 sparked a global lockdown, markets plummeted. The pandemic disrupted global supply chains: production lines came to a standstill, shipping stalled and air freight were grounded.
But within five weeks something extraordinary happened. The S&P 500 had plummeted in March 2020 but it soon rallied and its value doubled over the next 18 months.
Governments took unprecedented steps to recharge their economies. In the US alone, the government has allocated more than $4 trillion dollars on stimulus funding. And, in a world of low interest rates, consumers look elsewhere for better returns on their investments.
Duke university in North Carolina recently published a paper looking
at historical returns of the stock market over the past 95 years. It focused on different US equity sectors when inflation moved above 5% - in late 2021, the rate in the US moved above 5.3%.
Of course, historical trends are never a guarantee of future performance, but the researchers found that across all sectors, energy stocks delivered the best positive annual returns.
Another interesting sector were Soft commodities, such as corn, wheat, fruit or livestock have also historically held-or increased-their stock prices during times of increased inflation. This is holding true today.
Then there are the less flashy, age-old stocks which typically offer steady but not spectacular growth rates.
These are known as value stocks.
We took a look at the top three growth stocks and the top three value stocks, based on index weight - according to the S&P Growth and Value Index.
We studied the relationship between stock price and inflation since 2007 when the rate of inflation moved above 2%. The price of these growth stocks tends to decrease more quickly than the price of the value stocks as the rate of inflation increases.
00:00 Inflation is rising across the world
01:30 How Covid-19 affected stock markets
02:17 How stock markets bounced back in 2020
04:06 A world of low interest rates
05:40 Psychology and inflation
06:35 When hyperinflation strikes
07:08 How different stocks react to higher inflation
09:40 How bank stocks react to higher inflation
10:30 How value and growth stocks react to higher inflation
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Really well done piece. Many of us are seeking answers on how to best protect ourselves should inflation turn out to be more permanent. This gives a great current and historical perspective. Thanks David!
SHORT SELLING OF GOLD AND SILVER WILL GIVES PROFITS.SELL GOLD STOCK OPTIONS.
Stocks or listed shares of stock in major bourses provides "this thing" which is like a trust fund. Diversified Investments of this "fund" creates "real value". Blue Chip shares of stock appreciates over time and can counter "inflation" That's why the Swiss Franc becomes a viable alternative for investors from overseas.
Investing in stocks is advised during an inflationary period because it helps to minimize excess cash on hand and also growth stocks appreciate quickly during this time.
It’s crazy how expensive things have become here in the UK, electric bills are high and the prices of goods keeps increasing by the day and the PM doesn’t care.
One of my best investments was investing in growth and highly valued stocks; it accelerated my retirement process by ensuring my financial stability even during these challenging times of inflation.
@@kimhauge1792 I've always had a keen interest in the market, but I'm not sure how to approach it. Currently am studying to be a corporate finance major at the Queen Mary University of London.
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Is this a good time to buy stocks? I know everyone is saying stocks are at a discount and all, but just how long will It take for us to recover, obviously there are strategies to maneuver in this present market but these strategies doesn't come common to the average folk, or am I better off putting my money elsewhere?
If there's one thing about the market, it's that it always recovers, but I can't seem to focus on the long-run, major factors at play like my retirement and my reserve laying waste to inflation. I need a solid data trajectory and solution asap
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Nice content! Few years back i was assistant to a wealthy pen artist and within the short period i worked with him i observed that he had quite a chunk of investment everywhere, stocks, crypto, dividend investing to name a few, so he had revenues coming in from all angles. And in a year his worth doubled. With this i learned that the rich stay rich by investing.
i agree with this but the problem now is getting to make the right investments, Lots of people tend to lose their money while investing thereby making them lose interest and also end up discouraging other individuals around them.
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@@ethanwilliams9292 © Carriecoghill . *
Inflation is not a direct reason of the pandemic, it's the central bank reaction to save the stock market in my humble opinion.
America got a 5 million house deficit that part of the reason but nobody said anything about that. very funny
@@simonbarrett9568 that is why the landlords are getting richer every day, theres a friend of mine here in Panama that owns many of these houses and apartments in Usa, and he lives like a rich man here😉
@@francismarin8905 it down to supply and demand if there not enough properties the price keep go up yes landlord will get richer this is Becouse there not building enough property this will go on for 5 to 8 years before a crash. This is a cycle it comes and go in history. Just look at the charts and you can see
@@simonbarrett9568 5 to 8 yrs 😳can bubbles really go on for that long?
@@faiezfarhanrehman6703 more like 8 to 10 year as if that not put up interest rates and not build house fast that is how long it will take
We are already in the big crash, Inflation is a catastrophe. This CPI report is a colossal failure. To bring the housing market to a halt, the FED will have to pull all the stops. The unfortunate issue is that other markets are being decimated. If you want to stay green, you have to rely on a lot of diversification. Currently up 14% and being careful. Still a better deal than leaving it in a savings or checking account yielding 0-1 percent interest.
People believe their currency has the worth it does because they have no other option. Even in a hyperinflationary environment, individuals must continue to use their hyperinflationary currency since they likely have minimal access to other currencies or gold/silver coins.
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A weak dollar can signal an economic downturn, making me to ponder on what are the best possible ways to hedge against inflation, and I've overheard people say inflation is a money-eater thus worried about my savings around $200k.
The stock market is a way to hedge against inflation. Most notably amidst recession, investors need to understand where and how to allocate funds to hedge against inflation and still make profits.
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The pandemic did not cause inflation. Excessive QE did
tell tht to the UK who didn’t spend a ridiculous amount of money but are still seeing high inflation due to fallen supply
Why is inflation pumping markets to ATHS tho lol
Spot on
@@adetunjiadeniyi9993 it’s the $ not the £
The Dow Jones is NOT "30 of the highest performing companies." It's just thirty stocks that the Dow Jones considers to be representative of the total U.S. stock market.
Those 30 companies is a empty shell diluted into debts now
Interesting
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What is your prediction on Gold?..Interesting article.
Great work, thanks for putting this together.
Anyone know which paper from Duke this video is reference?
Fantatic stuff! Very interesting and engaging! Brilliantly put together :)
How does one tell the difference between inflation resulting from the factors listed in this video, and the decreasing value of currencies themselves?
This has been brewing for a while, I'm surprised it has taken as long as it has. You don't need an economics degree to know that if countries are printing money and giving it to people to stay at home and not work its going to cause huge inflation
Ya . Almost unbelievable
over 60% of that money went to large businesses/wallstreet or people savy enough to weasel their way into extra stimulus
@@vinayakachannappaajithanan9132 sweet 👌🤣
@@thegoodsmaster how is it going to wall Street or any big player? I mean how does it work?
and cant get them to go back to work. when they do they're a lazy sack
00:56 _”The cause?”_ Money printing. It’s always money printing.
A very interesting and most engaging film. The kind of 'fresh' take thats been required within this industry! Want to see more for sure!
Hi, I need answers
Does the delay of goods (stranded in ports) directly affects or a result of inflation too? If so, how many % (I accept an acceptable estimated rate increase) it will increase the prices after the covid pandemic is done? Anyone?
Huh.?
Quite interesting and educative video, thanks a lot.! Always the best
Very informative video! Please do more of these! Love the content
Wow amazing I really liked this one keep them coming so Informative and the visual make you understand a lot easier 👍👍🤛👏
th-cam.com/video/qF0YLKK0nik/w-d-xo.html
Amazingly put in together
very impressive work. thank you!
Hello, do you think you should buy usd / cad, Canada will raise interest rates by 0.25
You messed up. The research does not state Equity in energies,but commodities in energies. So energy commodities are what is valuable, not energy-producing companies. There is a long equity energy sector that only produces a yield of 1%.
Fantastic! Thanks for the great content 👍
Truly well explained, without any jargon.
Ultimately, in the long run, businesses that provide goods and services IS how wealth is created. Without profitable businesses, we don't have much of an economy. During this period of rising inflation, I've been buying shares of the companies in sectors where I am concerned about the rising costs, such as utilities. But as this video suggests, we can't lump all stocks into the same category. Some traded companies just move money around without actually making anything. Some traded companies don't provide an essential good or service. I believe those ones will suffer.
Can you provide some examples of "traded companies just move money around without actually making anything?"
Brilliant piece!
Beautiful and informative video keep going 🙌🏻🔥😍
They are connect with companies and organization that refer the growth continue to deal with more problems or the index growth that has less problems. That require case by case.
Nice vid. Wasn't expecting this 👍
love this stuff! Keep it up!
Great Video. I was able to understand everything!
I have just written in your last video that is not the bestmtime for investment in my opinion and you amke this GREAT video :3 what can i say, I SEE YOU REALLY LOVE THIS WORLD, if this is what you really love please KEEP THE GOOD WORK, MAYBE I DONT INVEST SOON BUT ILL KEEP CONECTED TO THIS CHANNEL BECAUSE I SEE IS WORTH THE TIME TO BE HERE :) REGARDS
More videos like this!
Vids like this and like "How is money created" by Coldfusion are what fuel my fascination of the market, money, the interconnectedness of it all, everything. Makes me happy
Great video!
This is a very nice video. Well edited.
Glad you liked it!
12:03. We are not likely to head back to double digit inflation like we had in the 70s? Well, that prediction did not age well. 26 Dec 2021
The pandemic isn’t causing inflation.
Thanks David it was a really great material, though you did not mention Gold nor Crypto as a hedge against inflation .
Why the excessive sound effects?
Vix correlation to SPY shows relative strength over 20days,very similar like before 1987 market crash...buckle up !!
Awesome video really interesting history repeats itself.
Nice
👍👍👍
really good video David!
nice video!
And why bill gate buy farm land n grow food is a sure gain then those empty shell stock markets
Excellent piece of information on inflation. Thanks David and team
Our pleasure!
Technology is deflationary, in the 70´s there was no technology at all. I think nowadays is completely different
It would have been better if this video content explained that inflation increases or decreases the rate speed of globalization and world market shifts. The so called economic reset also is it a cause by inflation or Reset doesn't not exist?
Thanks sir David
Nice video. 👍
"Inflation is a sustained period of rising prices for goods and services." This is the opening line of the article on your website . Or, it could equally be said "inflation is a sustained period of degradation (purchasing power) of your currency."
Us stock market is a on all listed companies are debts not real shares now as the past decade those QE funds or prints flooded the markets hoping to gain from the increase in share prices . So the US stock markets is a empty shell .
Great channel watching from Kenya
Thanks for watching! Where do you think inflation is headed in the coming months and years?
Where the fed starts tapering ,it's going to be a rollercoaster ride,am position to short till march next year,they all ready started reducing their portfolio with deadline in July next year,that's the market sell start point💥💯🇰🇪✌🏾
Good general overview, but oil prices are an example of inflation, not a cause of inflation. Also inflation expectations do not cause inflation or hyperinflation. Inflation is always and everywhere a monetary phenomenon. The only thing that causes it is the currency supply exceeding the supply of goods and services. Despite the common refrain that we have shortages, in fact there's no evidence of that. The US had the largest trade deficit ever this year, indicating that there were no problems importing goods. The problem is how much currency is chasing those goods.
Sorry... You mean if people will have more money thhe prices will increase ?
That the reason new allies must keep up with news. But if they fear the news that make their lost earning then they are not fix many problems that put more life at risk.
No idea what this show wanted to explain. I thought it would explain why inflation affects stock returns, why a growth stock is not performing well in an inflationary environment. Instead it was a video made of many stitched video clips to look cool. It's more like an advertisement. Nothing of value in this video.
2:12 air freight was grounded? Wrong. Airfreight went parabolic. The stocks fell temporarily, but the pandemic immediately pushed those who were sporadic online shoppers into fully fledged point & click consumers - it was like a feeding frenzy. All consumables went online & it has only marginally diminished. People started ordering online & it's convenient so they continue to do it.
I have a feeling this is similar to the 70s and 80s when inflation was out of whack
People should of been worrying about inflation 2 years ago and before.
Not now that inflation is here its deflation is what you need to worry about and it could crash at the start of 2022
Never should have left the gold standard.
You do chart inflation was go up before covid it what down with covid now it go up again with the 5 million house deficit in America
If prices go up. So does stocks. Simple.
The average Joe does not have a single dollar invested in Stocks, who will be impacted?
Buy more stock
It needs an update now with war
Free money ….speculation = inflation
Going through the comments I just have to say this. Let's all CALM DOWN. It's true things are this way but do you know why the rich keep getting richer? They are smart enough to keep doing whatever they do that works over and over again. Even if some of them are not very ethical. Truth be told, the world has always been like this. My advisor cautioned me back in the pandemic times that it's gonna take at least 5 years for the world economy to normalize again. And it's been rolling out like that so far. I took some measures, diversified my then $120k portfolio into more time tested holdings, today it's close to the $1M mark. Do I feel the inflation, sure! but can I live with it, YES! All because I played the game smart. The sooner you work on something, the better and faster the results. Of course the economy is like a storm right now but I can bet you that A LOT OF PEOPLE still live their normal lives. Cut down spending a little bit, adjust to the state of things and surely you'll weather this storm. Don't get me wrong, most politicians and banks are still selfish i**ots
I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for. You are doing well for yourself. Kudos. Is it your advisor that helped you diversify. This could be worth looking into
@@johnnyellis8928 Yea. Mary Elizabeth Huxley. Her name might ring a bell. She gained a lot of popularity during the Covid times when she coaching on how to take advantage of the markets and remain stable even from home. She has been of great help in that aspect. I work a full time job so I did not really have time to look into setting my finances right all by myself. People like her are what we all need at some point in our lives.
COVID was definitely going to effect the economy by at the minimum people changing jobs as some feel safer at home. Printing way more cash definitely caused inflation as people spent or invested more…. But eventually, businesses needed to pay employees more, need to raise prices, resources are going up.
But hey, as the market dips, it could be an excellent time to invest soon! :-D
Nothing such will happen unless I invest 😂
The stock skyrocketed because of Trump he gave lots of freedom to corporations and instilled lots of confidence in investors.
What we see now is going to be different we have outrageous inflation and plummeting stocks due to the lack of raw materials and disruption of global economic system due to Russia Ukraine conflict and sanction.
This will never be the same again, it’s just going to get worse even if Biden leaves tomorrow the confidence in the US dollar as global reserve currency on international arena is broken. There is no coming back from that.
"We the.people" who pay taxes are paying for those who decided to accept stimulus rather than working so now we have inflation.
I read a lot of Robert Robert Kiyosaki´s books and learned a lot from him, he is a great investor and he teaches me to understand the difference between an asset and a liability, he is a source of inspiration for me
Sddc
1:09 is Bali, Indonesia... Please come visit Bali, its safe and beautiful. Our international flight was just opened. 😘😘
The first 7 percent of profit goes to inflation. Way to go Brandon.
No, takže oba jsme tu akorát za blázny a já se jim nedivím. Taky bych z toho měla péči odybCh byla na jejich místě. Vždyť je to úplně ujetý. Já tímhle mě prostě seres. Jako já nevím jak tě mohlo napadnout mi tohleto dělat. Vždyť snad taky bys zuřil kdybys byl na mém místě. Já jsem prostě ze všeho úplně.zpufala!
Read the Bible for ultimate answers.
Keep up the great work! I appreciate your videos!
Very informative video, I couldn't love it more, thanks David!!!!