INFLATION, BUSINESSES & EQUITY
June 30, 2021
One of the primary concerns for every investor today across the globe is inflation. This is perpetuated by the meteoric rise seen in commodity prices (crude oil, metals, agri commodities, etc.) over the past year. However, headlines such as ‘stocks extend decline on inflation woes’ that are now prevalent, are not entirely accurate. In our exploration today of the relationship between inflation and equity markets, we do not endeavor to predict where inflation is headed. We are simply establishing the fallacy of thinking that rising inflation necessarily suggests doom for businesses. This inverse relationship touted between rising inflation and equity returns has its genesis predicated on two theories- one fundamental concerns on the business and other concerns on the sustainability of valuations
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