Are stocks a hedge
#1
Posted 17 June 2007 - 05:36 PM
The future is 90% present and 10% vision.
#2
Posted 17 June 2007 - 07:31 PM
Just like deflation was in this same pipe from 2002 to 2004?It is obvious now that inflation is in the pipe IMO
The short answer to your question though is "it depends" on the time factor involved.
Longer term, total equity market return (price appreciation + dividends) has indeed been greater than inflationary growth over the last 80 years. If this wasn't the case, no one would buy stocks, and those holding would sell, creating a negative supply/demand ratio and lower prices over this same time period.
Intermediate term though, the answer would be different as higher interest rates that were created by these same inflationary forces would push stock prices lower as the higher cost of doing business would eventually have a natural negative effect on earnings growth, and lower dividends would come as a direct result.
And then there's the question of which kind of inflation actually puts this wheel into motion to begin with. Over the last couple of years the idea of higher fuel costs were thought to contribute to this, but it's been productivity that has been able to absorb this, while at the same time, the overall growth rate of the United States has remained minimally buoyant in spite of any comparable negatives we've seen in the past based on this same format.
But not being an economist, it does make good sense to me that until we see wage inflation (lower productivity) become a problem, longer term rates will remain stuck in a trading range, and because of this, equity prices should continue to provide a good parking place in money's effort to make more money...at least in the United States.
Fib
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#3
Posted 17 June 2007 - 08:35 PM
#4
Posted 18 June 2007 - 03:50 AM
The future is 90% present and 10% vision.
#5
Posted 18 June 2007 - 06:35 AM
Edited by kisacik, 18 June 2007 - 06:39 AM.
#6
Posted 18 June 2007 - 07:26 AM
- kisa
#7
Posted 18 June 2007 - 07:44 AM
- kisa