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06 August 2021
05:56 hour

Inflation: timing stocks as an hedge?

Reddit Stocks

16/05/2021 - 15:41

Lots of people are saying stocks are the best hedge against inflation, as companies will absorb costs and raise prices. However, the current S&P yield is around 2%. If central banks raise interest rates to tame inflation, valuation of bonds and stocks will have to ajust to offer a higher yield. So if the 10 year US bond yields reach 3-4%, you can’t justify a 2% yield on S&P considering it’s a riskier asset. So current stocks valuations should fall. But then, when the S&P valuation is adjusted, it would be the perfect timing to buy/hold and hedge against inflation. Is this thinking correct?   submitted by   /u/mookmook89 [link]   [comments]


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