While 2021 has been a good year, so far, for stocks, it has also been a battle between two forces pulling in opposite directions, an economy coming back stronger than expected (positive) and concerns about the return on inflation (negative). In this session, I look at inflation across time in the US, as well as differences across countries, and provide a framework for understanding why Inflation, in both its expected and unexpected forms, affect the values of financial assets. I then look at US market history to examine how different asset classes have performed, as a function of inflation, and also delve into how segments of stocks (value vs growth, small vs large, industry groups) have been affected by inflation. I close with an assessment of the debate is about whether the surge in inflation that is occurring is transitory or permanent, and argue that since there is a non-trivial likelihood that this is permanent, the Fed should be careful about not talking itself into inaction.
Blog Post:
Slides:
Datasets:
1. Inflation in the US from 1928 – 2020:
2. Expected Inflation Rates for US from 1978-2020:
3. Expected Inflation Rates by Country from 2021 to 2026:
4. Historical Nominal and Real Returns by Asset Class from 1928 to 2020:
5. Historical Returns by Industry Groups from 1928 to 2020: …(read more)
LEARN ABOUT: Investing During Inflation
REVEALED: Best Investment During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
HOW TO INVEST IN SILVER: Silver IRA Investing
This topic has aged pretty well now 😀
Thank u sir .
Fed- *speak less, act more* epic one!!
An amazing content. Thank you very much for your valuable teachings. Never I’ve completed watching your videos without learning more and more.
Whatever “forecasted” data this presentation used is total BS… again… proofed that forecast is BS
Really Good – More Please!
In the real world of investments, economics and their infinite number of theories and theorists, everything seems true until it is not. Think of the illusionist, you believe what you watch but the reality is playing behind what you don't see, that's how investments and economy work in the real world, not by the book.
Professor, I watched your video in June and you guided us to wait till October to understand if inflation is transitory or not. We just received October's inflation numbers and those are the highest in 30 years at 6.2%. Can we confirm high inflation now?
Well, it seems that the genie is indeed out of the bottle.
love your channel!!!!!!!!
If inflation can be high but expected inflation low which will make bonds better vs if expected inflation is high then how come bonds always perform bad when inflation is high? Also in 1970s gold went parabolic because Nixon quit gold standard. When inflation goes high feds are raising rates. When t bonds is over 200 bases points it’s deadly for gold in normal circumstances. Yes in abnormal upcoming circumstances gold will still absorb extra dollars printed and in circulation but I disagree that gold will thrive in upcoming inflation. If stocks crash then people can switch to gold but stocks should absurd extra dollars too to at least go up by rate of inflation. Historically there have been stagnant period for stocks for like 10 years then uptrend period for like 10 years. 1970s was stagnant period and it might be similar if inflation doesn’t don’t spike because of stupid war.
Love your videos. Trying to get through the backlog. Thanks for the content
Professor, thank you for your efforts and sharing the knowledge..
Thank your for your brilliant insights and selfless sharing as usual!
Would be good to compare how commodities did during 60s and 70s, but oil embargo would probably throw things off
I was kind of expecting you will not bite the hand that feeds you and tell the real truth
Mere man me ek sawal aata h jab me desh ke bahar rehne waale logo ko dekhta hu: Kya lagta h isko hindi/tamil aati hogi? Thodi bohot? Ya sab bhul gaya hoga?
How is it rational to expect 3% inflation and accept a 2% coupon? Have followed and loved your work for years- thanks for making it available.
Couple comments:
1. logarithmic graph of bitcoin vs gold would be better IMO : )
2. bitcoin is a "millenial" gold, so it doesn't behave like gold! If you are looking for an asset that behaves like gold, I recommend gold itself. Bitcoin is a revolutionar… blah blah technology, behaves like a tech stock, but IMO it's true that bitcoin is a value container, much like gold. We'll see.
So basically, there is nothing I can do except maybe buy gold and real estate and hope for the best? Yes, that is depressing…
Mate, your lecture is unbelievably darn good! Thanks very much for taking the effort of doing this. As a non economist, all these forces are beginning to make some sense.
You deserve more. Real knowledge. Thankyou very much sir. You are grate teacher
Great video! I’m 45, my goal is to retire a multi millionaire before 50 and I've set asides $100k to achieve this, but considering inflation, how or where should I invest in?
thank you so much for the interesting video
So much great straight talk! Fantastic video
Thank you for the usual, excellent and thoughtful analysis. Not being a monetarist, I also see global supply chain disruptions as contributing to a lowering of the efficiency of global markets and thereby contributing to inflation.
Not even Aswath can save me now from my impending mortgage renewal
Hi sir
Thank you for sharing the insigtful framework. It is extremely helpful. One quick comment on typo: on slide 19, 'Expected Inflation' should be 'Real inflation'.
Thank you very much for sharing your extensive view on the imminent issue!
Lucid as always, thank you.
B E T O N Y E T M E Z DAMODARAN HOCAM <3
Thanks!
This is fantastic. Thanks so much Professor!
My portfolio includes stocks, long-term treasuries, gold, and commodities. All of the asset classes in my portolio have increased over the past month. But gold and commodities have significantly outperformed the stocks and treasuries. Stocks have actually been the WORST performer in my portfolio (despite still increasing). So real assets>treasuries>stocks.
Aswath my brother from Madras. You are the GOAT and a legend. The info on your YouTube channel help many people.
Just buy Bitcoin
Thanks for the excellent presentaion and talk
I watched this entire video and I want to say that I can't believe you published this for free. You're very generous. Thank you!
You have to look at the causes of inflation as well. Until we can rid of covid, we don't have the deflationary factor from globalized production.
Thanks aswath! It's so refreshing in this day and age to hear something of substance rather than the usual superficial sound bytes and production heavy videos that's all just fluff