stocks and inflation
Hello all...
i am new here and i have a few questions
inflation seems to be on the rise... am i correct in saying that bond prices will increase since the threat of a raise in interest rates or a lower price due to government selling
also will commodities stocks tend to increase along with the general level of prices increasing?
thanks again.
Inflation means bond rates will increase. When bond prices go down, Rates go up. If we have higher inflation or rates, that means $1 in five years goes less far. That means I'm willing to pay less for that dollar today than I'd be if there were low inflation or low rates.
So if you are worried about inflation and the fed raising rates, you probably want to stay away from bonds if you don't think that's already priced in.
Yes, but only to the extent that the bond market is betting the fed stays asleep at the wheel. If inflation expectations go up, long-term interest rates also go up, and most of the value in the commodities producer isn't what it's producing next week- but more like 5-10 years down the road. So you have to discount that production by longer-term interest rates.But yes, in general, commodities firms tend to do a lot better during inflationary cycles than stocks and certainly bonds.
Yahoo Finance has price data on a few of the biggest oil companies going back to the early '70s. Might be a good place to do some more research.
Commodities & Precious Metals go up
Bonds yeilds goes up, therefore the bond price goes down
Stocks in general go up there actuall value may remain the same or actually go down when inflation is factored in.
Real estate goes up.
thanks guys
got this in jim cramers book might be interested in it
how do i upload a picture?
The Intelligent Investor also has an explanation behind inflation and stocks. Basically, Graham says stocks are a decent defense against inflation.
If future earnings rise b/c of inflation, that increases a stock's price. But isn't that increase approximately equally offset by a higher required rate of return since inflation is, in theory, included in the discount rate?
On a more practical level, what is the reason materials and commodity stock prices rise during inflationary times? Is it b/c their products and gross margins (is say margins b/c matrials and commodity products don't have to deal with as much inflation built into their inputs since they are near the bottom of the supply chain, right?) benefit the most from increased economic activity (in the case of a normal expansion) or b/c or increased money supply (as is the current case)?
why can i post a pciture???
use full html as the input format
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