Inflation and Investing: False Alarm or Fair Warning?

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While 2021 has been a good year, so far, for stocks, it has also been a battle between two forces pulling in opposite directions, an economy coming back stronger than expected (positive) and concerns about the return on inflation (negative). In this session, I look at inflation across time in the US, as well as differences across countries, and provide a framework for understanding why Inflation, in both its expected and unexpected forms, affect the values of financial assets. I then look at US market history to examine how different asset classes have performed, as a function of inflation, and also delve into how segments of stocks (value vs growth, small vs large, industry groups) have been affected by inflation. I close with an assessment of the debate is about whether the surge in inflation that is occurring is transitory or permanent, and argue that since there is a non-trivial likelihood that this is permanent, the Fed should be careful about not talking itself into inaction.
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Can't explain how much I love him for the work he has done to impart wisdom to us. Thank you so much sir ❤We love you.

harshdhanania

Thank you so much professor! This is the best inflation research I've ever seen!

xueli

Thanks aswath! It's so refreshing in this day and age to hear something of substance rather than the usual superficial sound bytes and production heavy videos that's all just fluff

bjtheonetaken

Thank you Sir!
Great to hear a clear voice about this inflation mess...!

PPPP

First, I smash that like button, then watch the video. Totally enjoy your content

Fedot

Fed- **speak less, act more** epic one!!
An amazing content. Thank you very much for your valuable teachings. Never I’ve completed watching your videos without learning more and more.

swethaursnaresh

Thanks so much for a comprehensive discussion Professor Damodaran. Inflation is like the genie in the bottle which is hard to put back in once it gets out - that hit hard! Perhaps the other aspect that the Fed should not claim it can manage is to produce an exact Inflation print that policy makers seek to handle the US indebtedness. In that respect, Inflation is like trying to pour tomato ketchup from a bottle !

krystal_clearwater

Aswath my brother from Madras. You are the GOAT and a legend. The info on your YouTube channel help many people.

nuggetrouble

Thank you. According to Buffett capital intensive companies are more sensitive to inflation than capital light businesses.

marcb

Thank you for the awesome free lecture, Prof.

All the way from Malaysia.

kevinlee

Mate, your lecture is unbelievably darn good! Thanks very much for taking the effort of doing this. As a non economist, all these forces are beginning to make some sense.

dmenace

Professor, thank you for your efforts and sharing the knowledge..

kumz

Thanks Professor! If I am central bank I would more worried about price stability than growth. At least in the medium term if prices are stable, growth should come back.

muralimalyala