Episode Details

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.
Blog Post: https://aswathdamodaran.blogspot.com/2021/05/inflation-and-investing-false-alarm-or.html
Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/Inflation.pdf
Datasets:
1. Inflation in the US from 1928 - 2020: http://www.stern.nyu.edu/~adamodar/pc/blog/InflationUS.xlsx
2. Expected Inflation Rates for US from 1978-2020: http://www.stern.nyu.edu/~adamodar/pc/blog/InflationExpectations.xlsx
3. Expected Inflation Rates by Country from 2021 to 2026: http://www.stern.nyu.edu/~adamodar/pc/blog/InflationbyCountry.xlsx
4. Historical Nominal and Real Returns by Asset Class from 1928 to 2020: http://www.stern.nyu.edu/~adamodar/pc/blog/InflationAssetReturns.xlsx
5. Historical Returns by Industry Groups from 1928 to 2020: http://www.stern.nyu.edu/~adamodar/pc/blog/InflationIndustryReturns.xlsx

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