Inflation rates have been rising in big economies such as Brazil, Russia, the US and the UK throughout 2021. This will have a knock-on effect on the stockmarket, but some investment stocks may perform better than others.
Our in-depth article about investing during high inflation periods:
Some economists fear a return to high inflation, the likes of which has not been seen for more than 40 years. And since the start of 2021, it has been rising steadily across the world.
If inflation continues to rise, what effect will it have on the stockmarket and your wealth?
When covid-19 sparked a global lockdown, markets plummeted. The pandemic disrupted global supply chains: production lines came to a standstill, shipping stalled and air freight were grounded.
But within five weeks something extraordinary happened. The S&P 500 had plummeted in March 2020 but it soon rallied and its value doubled over the next 18 months.
Governments took unprecedented steps to recharge their economies. In the US alone, the government has allocated more than $4 trillion dollars on stimulus funding. And, in a world of low interest rates, consumers look elsewhere for better returns on their investments.
Duke university in North Carolina recently published a paper looking
at historical returns of the stock market over the past 95 years. It focused on different US equity sectors when inflation moved above 5% — in late 2021, the rate in the US moved above 5.3%.
Of course, historical trends are never a guarantee of future performance, but the researchers found that across all sectors, energy stocks delivered the best positive annual returns.
Another interesting sector were Soft commodities, such as corn, wheat, fruit or livestock have also historically held—or increased—their stock prices during times of increased inflation. This is holding true today.
Then there are the less flashy, age-old stocks which typically offer steady but not spectacular growth rates.
These are known as value stocks.
We took a look at the top three growth stocks and the top three value stocks, based on index weight — according to the S&P Growth and Value Index.
We studied the relationship between stock price and inflation since 2007 when the rate of inflation moved above 2%. The price of these growth stocks tends to decrease more quickly than the price of the value stocks as the rate of inflation increases.
00:00 Inflation is rising across the world
01:30 How Covid-19 affected stock markets
02:17 How stock markets bounced back in 2020
04:06 A world of low interest rates
05:40 Psychology and inflation
06:35 When hyperinflation strikes
07:08 How different stocks react to higher inflation
09:40 How bank stocks react to higher inflation
10:30 How value and growth stocks react to higher inflation
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Really well done piece. Many of us are seeking answers on how to best protect ourselves should inflation turn out to be more permanent. This gives a great current and historical perspective. Thanks David!
Inflation is the ‘hamster-wheel’ the central bankers make us run on all our lives !
Nice content! Few years back i was assistant to a wealthy pen artist and within the short period i worked with him i observed that he had quite a chunk of investment everywhere, stocks, crypto, dividend investing to name a few, so he had revenues coming in from all angles. And in a year his worth doubled. With this i learned that the rich stay rich by investing.
Thanks sir David
The stock skyrocketed because of Trump he gave lots of freedom to corporations and instilled lots of confidence in investors.
What we see now is going to be different we have outrageous inflation and plummeting stocks due to the lack of raw materials and disruption of global economic system due to Russia Ukraine conflict and sanction.
This will never be the same again, it’s just going to get worse even if Biden leaves tomorrow the confidence in the US dollar as global reserve currency on international arena is broken. There is no coming back from that.
It needs an update now with war
Drifting into the trading world without the help of a professional trader and expecting profits is like turning water into wine, you would need a miracle, that's why i trade with hilder Ferguson, her skills set is exceptional.
Very informative video, I couldn't love it more, thanks David!!!!
12:03. We are not likely to head back to double digit inflation like we had in the 70s? Well, that prediction did not age well. 26 Dec 2021
Hello, I'm new to stocks trade and l've been making huge losses but recently I see a lot of people earning from it. please can someone tell me what I'm doing wrong
Free money ….speculation = inflation
Ultimately, in the long run, businesses that provide goods and services IS how wealth is created. Without profitable businesses, we don't have much of an economy. During this period of rising inflation, I've been buying shares of the companies in sectors where I am concerned about the rising costs, such as utilities. But as this video suggests, we can't lump all stocks into the same category. Some traded companies just move money around without actually making anything. Some traded companies don't provide an essential good or service. I believe those ones will suffer.
Scott Morrison has locked down Australia. We are living in big prison camp. Here in Australia is conducting mental genocide. Millions of people can not leave the country and visit sick or dying relatives overseas. 30 % of Australian citizens are born overseas. Give or take their children and we count at least 45%. Australian citizens are looking for boats to leave the country illegally. At the moment this camp opens all these people are going to leave. Good luck to idiotic lock downs and stupid politicians. Economic crush is coming. Behind the pandemic curtains is watching a economic catastrophe created during last 20 years of enormous waste of money and resources for wars and leisure for reach idiots. Lock downs are only cover up for big economic depression.
COVID was definitely going to effect the economy by at the minimum people changing jobs as some feel safer at home. Printing way more cash definitely caused inflation as people spent or invested more…. But eventually, businesses needed to pay employees more, need to raise prices, resources are going up.
But hey, as the market dips, it could be an excellent time to invest soon! 😀
More videos like this!
Vids like this and like "How is money created" by Coldfusion are what fuel my fascination of the market, money, the interconnectedness of it all, everything. Makes me happy
No idea what this show wanted to explain. I thought it would explain why inflation affects stock returns, why a growth stock is not performing well in an inflationary environment. Instead it was a video made of many stitched video clips to look cool. It's more like an advertisement. Nothing of value in this video.
They are connect with companies and organization that refer the growth continue to deal with more problems or the index growth that has less problems. That require case by case.
That the reason new allies must keep up with news. But if they fear the news that make their lost earning then they are not fix many problems that put more life at risk.
Never should have left the gold standard.
People should of been worrying about inflation 2 years ago and before.
Not now that inflation is here its deflation is what you need to worry about and it could crash at the start of 2022
Vix correlation to SPY shows relative strength over 20days,very similar like before 1987 market crash…buckle up !!
The average Joe does not have a single dollar invested in Stocks, who will be impacted?
It would have been better if this video content explained that inflation increases or decreases the rate speed of globalization and world market shifts. The so called economic reset also is it a cause by inflation or Reset doesn't not exist?
Good general overview, but oil prices are an example of inflation, not a cause of inflation. Also inflation expectations do not cause inflation or hyperinflation. Inflation is always and everywhere a monetary phenomenon. The only thing that causes it is the currency supply exceeding the supply of goods and services. Despite the common refrain that we have shortages, in fact there's no evidence of that. The US had the largest trade deficit ever this year, indicating that there were no problems importing goods. The problem is how much currency is chasing those goods.
How does one tell the difference between inflation resulting from the factors listed in this video, and the decreasing value of currencies themselves?
Why the excessive sound effects?
"We the.people" who pay taxes are paying for those who decided to accept stimulus rather than working so now we have inflation.
Truly well explained, without any jargon.
And why bill gate buy farm land n grow food is a sure gain then those empty shell stock markets
USA market is now a empty shell with QE n rescue package n covid support the prints of usd us debts bonds noted worthless papers . If u want fight inflation buy land n grow food n breed live stock
There is no inflation, companies are increasing prices to make up for the money they lost last year. They're trying to spin it like an inflationary problem that the President is responsible for.
The first 7 percent of profit goes to inflation. Way to go Brandon.
Read the Bible for ultimate answers.
Awesome video really interesting history repeats itself.
2:12 air freight was grounded? Wrong. Airfreight went parabolic. The stocks fell temporarily, but the pandemic immediately pushed those who were sporadic online shoppers into fully fledged point & click consumers – it was like a feeding frenzy. All consumables went online & it has only marginally diminished. People started ordering online & it's convenient so they continue to do it.
A very interesting and most engaging film. The kind of 'fresh' take thats been required within this industry! Want to see more for sure!
Anyone know which paper from Duke this video is reference?
What is your prediction on Gold?..Interesting article.
00:56 ”The cause?” Money printing. It’s always money printing.
Buy more stock
You messed up. The research does not state Equity in energies,but commodities in energies. So energy commodities are what is valuable, not energy-producing companies. There is a long equity energy sector that only produces a yield of 1%.
Us stock market is a on all listed companies are debts not real shares now as the past decade those QE funds or prints flooded the markets hoping to gain from the increase in share prices . So the US stock markets is a empty shell .
Sddc
The Dow Jones is NOT "30 of the highest performing companies." It's just thirty stocks that the Dow Jones considers to be representative of the total U.S. stock market.
Keep up the great work! I appreciate your videos!
The pandemic did not cause inflation. Excessive QE did