January 21, by Tim McMahon 4 Comments. My question is… what the cost of living did in these time periods and if there is a correlation between the stock market and the cost of living?

You would think that if all commodities are going up stocks would probably go up as well, since companies produce commodities. Often high inflation can actually squeeze profit margins and cause companies to lose money or barely break even.

So lets look specifically at the correlation between stock prices and the inflation rate. So we can see for instance that in the years between and the end of they averaged 9. That is a high annual inflation rate! In the above chart, that would be the red line minus the blue bar. The line in the middle of the bar that means that when you subtract the 9. Unfortunately, in order to get the true picture you need to see the actual level of the market returns minus the inflation rate.

In this chart the key line is the red line. For more information see: Inflation Adjusted NYSE Stock Index. See our article Average Annual Inflation Rates by Decade for more information on when to use the CAGR vs. InflationStock Market Tagged With: January 3, at 3: I regressed US CPI vs. MSCI WORLD from till rolling 1 year data and correlation is positive in all those years except it gets mildly negative almost zero in and So yes its safe to make a comment that correlation between them is generally positive.

Even on occasions when it was slightly negative it was forex growth bot live test case where inflation was going down while equities were rallying.

So that is something like opposite of stagflation.

The true stagflation scenario increasing inflation and falling equities was only really observed during s. November 23, at October 7, at 7: Thanks for the enlightening data; I think a major question for retirees is what to do to protect a portfolio.

Do equities act as a hedge against inflation versus other holdings? Timing financial armageddon is quite intimidating however. TIPS seemed the answer until the FED intervention. Is there a correlation between inflation and the stock market? This chart compares decade inflation and stock market returns during the decade. Your email address will not be published.

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Stock Market's Brightest False Beacon Financial Trend Forecaster says: January 21, at 8: Leave a Reply Cancel reply Your email address will not be published.

Observations: Years of Inflation-Adjusted Stock Market History

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