Higher Inflation Sinking Stock Prices? | Adviser Investments

Will Higher Inflation Sink Stock Prices?

According to a recent CNBC survey, inflation is tied with COVID-19 as Americans’ biggest concern. And investors want to know: Will higher inflation and higher borrowing costs negatively affect stock prices? Here’s what Research Analyst Liz Laprade said in our recent webinar, Booster Shots, Market Shocks and the End of Fed Intervention:

* * * * **

Liz Laprade

Will higher inflation sink stock prices? We can see by now that inflation isn’t as “transitory” as the Federal Reserve had formerly suggested. A lot of that is coming from supply chain backlogs pushing up prices of things like shipping and groceries. We’re starting to see it seep a little bit into services as well. It’s possible that if there is higher inflation running longer and hotter, the Fed may raise interest rates sooner than many had originally anticipated. That can actually be a good environment for stocks and for investors who want to earn a return higher than inflation and the rate of return on risk-free bonds.

That’s hard to achieve with bonds alone, so you could see investors shift away from bonds into equities, pushing up stock prices. In other words, I don’t equate high inflation and high interest rates with a poor stock market return.

Click here for a replay of Booster Shots, Market Shocks and the End of Fed Intervention. Please contact us at (800) 492-6868 to learn more about comprehensive wealth management solutions.

*Webinar recorded after the market closed on Wednesday, October 20, 2021.

Disclaimer: This material is distributed for informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Our statements and opinions are subject to change at any time, without notice and should be considered only as part of a diversified portfolio. Mutual funds and exchange-traded funds mentioned herein are not necessarily held in client portfolios. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

You may request a free copy of the firm’s Form ADV Part 2A, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.

Past performance is not an indication of future returns. We do not provide legal or tax advice, nor sell insurance products. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Always consult an attorney or tax professional, or licensed insurance professional regarding your specific legal or tax situation, or insurance needs.

© 2021 Adviser Investments, LLC. All Rights Reserved.