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Layman here so I am going to throw out a lot of terms that I probably donāt mean in the same way you would if you were saying them.
Anywho. So in the US as of late we have been dealing with inflation. And ignoring finger pointing to specific reasons one thing that is a bit confusing to me is the following. I had figured that if the USD was truly experiencing inflation that the fundamentals of equities on average would tend to rise at the rate of inflation. Personally Iām not sure Iām observing this happeningā¦.
I guess I look at inflation like a devaluation of the dollar. So letās say company ABCs business was not adversely effected by the inflation we might see them raise prices with inflation and eventually have the same āvalueā when corrected for inflation.
I guess my expectation was that the fundamental value (not stock price) of equities would rise with inflation (kinda like how I-bonds do) over timeā¦. of course unless inflation changes their business model significantly.
I have a rough idea of why that hypothesis is wrong. But I would be curious to hear a more fleshed out reason. And maybe itās true if you give it more time?
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