The stock market would experience inflation, just it won't be evident in the ticker:
Let's say over the next year 1 USD inflated 50% to be worth only 50¢. So all the stocks that used to be $50 would now still be labeled as $50, yet only be 'worth' $25. In this way, the market never crashes due to inflation. You still get robbed of purchasing power, but your stocks need not ever report a loss.
What would crash the stocks would be if a foreign market has less inflation than ours. This, you can watch the USDX to see if, for example, the GBP is strong and so investors might move towards the LSE, pulling value out of US markets.
Thanks! That's a pretty interesting take, especially the aspect of foreign stock markets and foreign currencies.
I did not mean to imply that I think that the stock market would crash due to inflation, that is to say I do not think stock prices would go down at all under those circumstances. To the contrary, I believe they would go up in price along with other things as the purchasing power of currency diminishes. This is especially so if the inflation is predictable.
So in my view, bread would go up in price, gas would go up in price, houses would go up in price, and so would ownership in publicly traded corporations.
The stock market would experience inflation, just it won't be evident in the ticker:
Let's say over the next year 1 USD inflated 50% to be worth only 50¢. So all the stocks that used to be $50 would now still be labeled as $50, yet only be 'worth' $25. In this way, the market never crashes due to inflation. You still get robbed of purchasing power, but your stocks need not ever report a loss.
What would crash the stocks would be if a foreign market has less inflation than ours. This, you can watch the USDX to see if, for example, the GBP is strong and so investors might move towards the LSE, pulling value out of US markets.
Thanks! That's a pretty interesting take, especially the aspect of foreign stock markets and foreign currencies.
I did not mean to imply that I think that the stock market would crash due to inflation, that is to say I do not think stock prices would go down at all under those circumstances. To the contrary, I believe they would go up in price along with other things as the purchasing power of currency diminishes. This is especially so if the inflation is predictable.
So in my view, bread would go up in price, gas would go up in price, houses would go up in price, and so would ownership in publicly traded corporations.