The Impacts of Inflation on the Economy, Stock Market, Dollar, and Gold | A Discussion on Economics by Kirtan Shah

by | Oct 3, 2023 | Invest During Inflation | 33 comments




Inflation is the only macroeconomic factor that you need to track to understand the correlation between Stock Market, Dollar & Gold. This video helps you understand in the most simplest manner of how when inflation moves up or down, how does the stock market, dollar & gold reacts.

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Inflation is a critical factor that affects various aspects of the economy, including the stock market, the value of the dollar, and even the price of gold. Understanding the implications of inflation is essential for investors, policymakers, and individuals alike.

First and foremost, let’s comprehend what inflation is. Inflation refers to the general increase in prices of goods and services over a period of time, leading to a decrease in the purchasing power of money. When inflation is high, the same amount of money can buy fewer goods and services than before, thus eroding its value.

One significant impact of inflation is on the economy as a whole. High inflation rates can have adverse effects on economic growth. As prices rise, consumers tend to reduce their spending, as they are unable to afford the same quantity of goods and services as previously. This decrease in consumption can lead to a slowdown in economic activity, impacting businesses and job creation. Furthermore, high inflation can reduce investment by businesses, as uncertainty about future prices makes it difficult to plan for the future.

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Inflation also has a profound influence on the stock market. When inflation rises, the value of stocks may decrease, primarily because investors anticipate a reduction in the purchasing power of future profits. As a result, investors may sell their stocks, leading to a decline in stock prices. Furthermore, rising inflation can lead to higher interest rates set by central banks to curb inflation. These higher interest rates increase borrowing costs for businesses, which can negatively affect corporate profits and stock prices.

The value of the dollar is another area heavily impacted by inflation. When inflation is high, the value of the dollar depreciates compared to other currencies. This occurs because the purchasing power of the dollar decreases, making it less attractive to foreign investors. Consequently, the demand for the dollar decreases, leading to a decline in its exchange rate. A weaker dollar makes imported goods more expensive, and it can also have an impact on international trade competitiveness, affecting export-oriented industries.

In times of inflation, many investors turn to gold as a safe-haven investment. Gold is often considered a store of value during times of economic uncertainty, as it tends to retain its worth even when the value of currency declines. As a result, the price of gold often rises during periods of inflation. Investors view gold as a hedge against inflation and use it as a way to protect their wealth.

Overall, inflation plays a vital role in shaping the economy, the stock market, the value of the dollar, and even the price of gold. It is crucial for investors, policymakers, and individuals to understand the potential effects of inflation and adjust their strategies accordingly. Monitoring inflation rates and staying informed on economic indicators can help individuals make better financial decisions to navigate the impacts of inflation effectively.

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33 Comments

  1. proudindian

    Thanks for explaining such a complex concept into an easily understandable format however Need your thoughts on how the dollar affects by Fed rate increase? Does the dollar not depreciate similar to inr? If yes, how does it affect the Indian market?

  2. TUSHAR KARMOKAR

    Hows the correlation between Indian and us stock market?? Is it low or negativity correlated??

  3. Sanjog Kar (San)

    Thank you sir This is a golden information ❤❤❤

  4. Kuldeep Solanki

    Thanks a lot for nice explanation

  5. Kuldeep Arora

    Right! Right !! Right !!! Deluge. Spoils the listening experience.

  6. Vinod Jadhav

    Please continue this series

  7. Ravichandran S

    super presentation… welldone

  8. Purva Bhogaonkar

    What will happen to debt market? In case of higher interest rate scenario

  9. jayshree Jha

    Please upload more macro economics topics …

  10. Rajesh Mahendran

    @Kirtan Wonderful Sessions, personally miss your videos. Request you to upload videos on a periodical basis.

  11. Saurabh Aggarwal

    For Inflation, Both Demand and Supply factors. If supply is there and no demand is there then no inflation. And Vice Versa.

  12. Phaneendra K V

    Nice Video.
    But why are Pharma & IT Stocks going down in the current inflationary scenario?

  13. Dilip Rajpurohit

    Absolutely loved the way you explain things. Utter ease and sheer knowledge. Kirtan Sir, do keep creating content, You'll definitely nail it.

  14. Holistic Health

    Amazing explanation. You are master at keeping complex topics in simplest language

  15. Raghav Bhambri

    Amazing explanation with some interesting examples.. looking forward for much more informative videos

  16. Anuj sood

    What about silver

  17. Rishabh Mahajan

    Pls make video on debt fund , how to select

  18. Neha N

    Just so amazing, the way you explained it. How easily you explained the impact of inflation on different sectors, gold, and crude. hats off to your engaging style. Thoroughly enjoyed the session.

  19. Gaurang N

    Awesome Content as Ever !!

  20. Aman Gajbhiye

    Sir I have a question
    RBI have raised interest rates from 4% to 5.9% this year and inflation is still above 6%
    Then how the banking sector is doing so great in these times?
    Shouldn't the banking sector be falling?

  21. Saitej Paruchuru

    Absolutely on point, clear explanation

    Can you explain the reason behind fall of IT stocks despite of $ appreciation

  22. Manan

    As always, excellent content sir. This video is MUST for every person who want to make investment in type of asset.
    I would suggest you to upload these type of long videos in 2 parts. Bcoz, many people goes eye rolling when they see 40 min video. Same video just break in 2 part and upload as part1 part2 at same time. Moreover it become easy to digest such a complex content for a common man. I watched in one go bcoz i have habit of taking 3 hrs video lectures at one go. So it was easy for me. But most people won't have that patience even if they know that it's very important video for them still they will postpone. If it will be in parts they will be like okay, 20 min i have in this short traveling let's do part one. It's just psychological thing.

  23. Nikkhil Khurana

    Crisp and Resourceful ✨✨

  24. Neha N

    If you can also cover technology stocks, why are these stocks corrected globally?

  25. Neha N

    You have great art to articulate every complex topic in a simple and understanding way. Thank you for your useful lessons as always

  26. Swapnil limaye

    Kirtan thanks for your wonderful session ..
    Just want to understand from US perspective…
    For e g In US inflation have gone up from 2% to 8% but dollar has not depreciated why ?

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