From the course: Understanding Capital Markets
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Investing and inflation
From the course: Understanding Capital Markets
Investing and inflation
- [Instructor] For the first time in 40 years, inflation has become a major issue for investors. Let's take a look at how to make sure your inflation outlook dovetails with your investment approach. So what I've done is pull up some data from FRED. FRED is the Federal Reserve Economic Database, and this comes from the Federal Reserve Bank of St. Louis. And in particular, what I've done is pull up this graphic on the S&P 500. Now I had to edit it to make some changes here, and I have overlaid it with inflation. So we've got inflation as represented by sticky price inflation less food and energy in red, and then the S&P 500 in blue. And in fairness to the current economic climate, this makes inflation look pretty modest, right? If we think about kind of that red line, this makes it, oh, well, inflation, the big spike, it only went from here to here. But if you look at that, that's a 10% increase on that axis. Stocks are just a lot more volatile than inflation is. If we had inflation…
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