Can inflation ‘help’ stocks?

[anxvariety]

If stocks are measured in dollars, and getting paid with more of them during inflationary times – wouldn’t this increase the stock price?

I’m interested in hearing what you all have to say about inflation and it’s general relationship to stock market. Try listing possible pros and cons.

I know that salaries probably don’t keep up – the basic inelastic needs will still be bought.. I guess some companies will take more of a pesons money leaving less for others… con?

[anxvariety]

I think I meant ‘elastic’ or maybe not 😉 Elasticity is the measure of how demand is affected by change in price right? With things like cigarettes and gas being inelastic in that demand doesn’t or changes little with increases in price? Correct me, thanks.

[anxvariety]

I think I meant ‘elastic’ or maybe not 😉 Elasticity is the measure of how demand is affected by change in price right? With things like cigarettes and gas being inelastic in that demand doesn’t or changes little with increases in price? Correct me, thanks.

[anxvariety]

I think I meant ‘elastic’ or maybe not 😉 Elasticity is the measure of how demand is affected by change in price right? With things like cigarettes and gas being inelastic in that demand doesn’t or changes little with increases in price? Correct me, thanks.

[Bugs]

Value is not the same as price. While the “price” of the stocks increase, so does the price for everything else.

[Bugs]

Value is not the same as price. While the “price” of the stocks increase, so does the price for everything else.

[Bugs]

Value is not the same as price. While the “price” of the stocks increase, so does the price for everything else.

[anxvariety]

Understood.. but the price is still going up. If you buy and sell you make money. Not a game I’m playing since I’d rather have precious metals, but maybe a reason as to how stocks could go up right now?

[anxvariety]

Understood.. but the price is still going up. If you buy and sell you make money. Not a game I’m playing since I’d rather have precious metals, but maybe a reason as to how stocks could go up right now?

[anxvariety]

Understood.. but the price is still going up. If you buy and sell you make money. Not a game I’m playing since I’d rather have precious metals, but maybe a reason as to how stocks could go up right now?

[davelj]

This has been discussed here in a previous thread. Inflation can help the earnings of some companies. BUT, the problem is that even if inflation helps earnings, the discount rate applied to those earnings increases as well, thereby reducing the present value of said earnings (i.e., the stock price). The negative effect of inflation on the discount rate (and thus stocks’ present value) is typically much greater than any positive effect on earnings. So, for the most part, inflation is bad for stock prices. See the 70s for a good example of this.

[davelj]

This has been discussed here in a previous thread. Inflation can help the earnings of some companies. BUT, the problem is that even if inflation helps earnings, the discount rate applied to those earnings increases as well, thereby reducing the present value of said earnings (i.e., the stock price). The negative effect of inflation on the discount rate (and thus stocks’ present value) is typically much greater than any positive effect on earnings. So, for the most part, inflation is bad for stock prices. See the 70s for a good example of this.

[davelj]

This has been discussed here in a previous thread. Inflation can help the earnings of some companies. BUT, the problem is that even if inflation helps earnings, the discount rate applied to those earnings increases as well, thereby reducing the present value of said earnings (i.e., the stock price). The negative effect of inflation on the discount rate (and thus stocks’ present value) is typically much greater than any positive effect on earnings. So, for the most part, inflation is bad for stock prices. See the 70s for a good example of this.

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