Stocks After Inflation Peaks

Today's Chart of the Day is in a BlackRock article. This is the organization who issues the iShares Exchange Traded Funds (ETFs) in our portfolios.

The article quotes, “Inflation peaks and market rallies often go hand in hand. Since 1927, the average S&P 500 return in the 12 months following an inflation crest was 11.5%.”

The past is not indicative of future results, and of course due to the unique situation (COVID, supply chain issues, low unemployment, etc.), a relief rally may take longer. However, history does support our long-term view of stocks. 

That view is:

Stocks, although they can experience brutal declines in the short-term, over a long-term period they are historically the best hedge against inflation. This is because companies have the ability to raise prices and generate more profits, which subsequently increases their stock prices.