inflation as a cold fact has both a positive and negative effect on stocks prices.
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these should cancel each other out implying a neutral effect of inflation on assets
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a reason they fall is when inflation is a warning sign of stagflation. a combination of inflation AND unemployment.https://www.investopedia.com/terms/s/stagflation.asp …
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stagflation is not intuitive at all and was considered impossible in previous economic theories. how could unemployment (decreasing demand) create a rise in prices? it’s like fiery water. they’re supposed to be opposites.
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stock prices fall then b/c of expected stagflation. vs the intuition where they should increase in price as a way of keeping up with inflation.
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End of conversation
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