Stocks
When inflation occurs, bondholders suffer losses and debtors gain. Stocks are actually a type of equity investment and are relatively cost-effective.
Inflation will cause price increases and currency depreciation. For listed companies, the amount of income will increase (for example, if pork increases from 10 yuan to 20 yuan, the profit of a pork dealer will increase from 5 yuan to 15 yuan). So of course the stock prices will rise), especially those listed companies with core competitiveness and profitability, their stock prices will rise much faster than the inflation rate. Investing in such stocks can avoid asset depreciation and even earn considerable investment returns.
Inflation is primarily caused by excessive increases in the money supply. There is generally a direct relationship between money supply and stock prices, that is, an increase in money supply causes stock prices to rise, and conversely, a decrease in money supply causes stock prices to fall, but in special circumstances it can have the opposite effect.
It increases the demand for stocks and promotes the prosperity of the stock market.
1． The increase in money supply increases the demand for stocks and promotes the prosperity of the stock market.
2. The increase in money supply causes the price of social goods to rise, and the sales revenue and profits of joint-stock companies increase accordingly, which causes the nominal income of stocks to rise to a certain extent, increases the demand for stocks, and thus the stock prices also rise accordingly.
3． Inflation often brings false market prosperity. The awareness of value preservation makes people tend to invest money in precious metals, real estate and short-term bonds. The demand for stocks will also increase, thus causing the stock price to increase accordingly.
However, on the other hand, when inflation reaches a certain level and the inflation rate even exceeds double digits, it will push interest rates up and funds will flow out of the stock market, causing stock prices to fall.