Therefore, inflation can create a big bull market in commodity futures, but due to the money-making effect, funds will flow out of the stock market and flock to various commodity futures, so it will have a relatively adverse impact on the stock market.
In times of inflation, the stock market will fall instead.
In the period of inflation, are investors willing to lend for a long time at a fixed loan interest rate? I'm afraid most investors don't want to do this, because inflation may continue to accelerate during the borrowing period, and by the time the principal and interest are recovered at maturity, the actual principal may have shrunk due to inflation.
Historically, central banks in many countries, from the United States to China, began to tolerate negative interest rates. Therefore, in the case of increasing inflation, more investors are willing to buy assets such as gold, oil and real estate, otherwise the funds used may not be able to offset the loss rate caused by inflation. So in the case of inflation, most of the investment income will be swallowed up by inflation.
In the case of inflation, the government will generally take measures such as controlling and reducing fiscal expenditure and tightening monetary policy, which will increase market interest rates and thus lower stock prices. In addition, in the case of inflation, enterprise managers and investors can't clearly know what the immediate profit is, let alone predict the future profit level.
They can't judge the rising cost of price-related equipment, raw materials and wages. In addition, due to the system of taxing nominal income under inflation, corporate profits will be greatly reduced or even disappeared. Therefore, the instability of corporate profits caused by inflation will also affect the profits of listed companies, which is not conducive to the upward trend of the stock market.