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How does inflation affect stock market performance?

High inflation tends to feed on itself and impair the economy’s long-term performance. Real estate, energy commodities, and value stocks have historically outperformed during high or rising inflation. Bonds and expensive growth stocks tend to lag since inflation lowers the present value of their future cash flows to investors.

Is higher inflation bad for stock prices?

Higher inflation by itself isn’t necessarily bad for stock prices. Rising prices boost corporate profits, especially if companies can pass on higher input costs to their customers via price hikes. Higher interest rates are an entirely different story for stocks.

Do value stocks perform better during high inflation?

High inflation has historically correlated with lower returns on equities. Value stocks tends to perform better than growth stocks in high inflation periods, and growth stocks tend to perform better during low inflation. Investopedia requires writers to use primary sources to support their work.

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