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16 June 2021
10:30 hour

The Tell: Here is where higher inflation really hurts, says world’s largest asset manager

Market Watch

10/06/2021 - 20:27

U.S. bond markets may be shrugging off concerns about the spike in the cost of living, but higher prices at the pump, for used cars and at grocery stores inflict a 'direct hit' to lower-income households, warns BlackRock's Rick Rieder, CIO of global fixed income.


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    From my understanding, increasing rates of inflation are signs that the economy is recovering. interest rates have an inverse relationship to inflation. higher rates of inflation results in lower interest rates and vice versa. with how the economy is right now, everyone is expecting signs of increasing rates of inflation as expected by the fed pumping more and more money into the economy (stimulus checks, etc). because of this, people are more willing to spend their money on products that businesses create, thus leading businesses to make even more money, leading them to create even more products which leads to a positive loop that just keeps on going up. if businesses do good, their stocks generally tend to go up. and since higher inflation rates leads to lower interest rates, the act of borrowing money increases which causes even more money to get spent on products and in stocks. because of this process, shouldnt higher inflation rates just cause the stock market to continue to go up? why do people say that the stock market will decrease due to higher inflation rates if my above explanation makes sense? i understand that things will generally be more expensive and that the dollar will decrease in value but wouldnt investing in the stock market (say S&P500) generally results in higher returns vs inflation? or is just 'some' inflation good and we just have not reached 'astronomical' rates of inflation yet that would be bad for the economy/stocks? if you take a look at the history of interest and inflation rates, we are much more on the lower side vs what we were decades ago? hope my question makes sense, thanks for any help i can get!!   submitted by   /u/whitecat69 [link]   [comments]
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  39. Market Extra: U.S. Treasury yields fall despite higher inflation: Here are some reasons why. (10/06/2021 - Market Watch)
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  41. Relationships: Inflation vs. Currency vs. Interest Rates (24/02/2021 - Reddit Stocks)
    Been studying up for a S&T (Sales and Trading) interview at a BB and this is driving me crazy. Seems like I'm running into conflicting answers everywhere I go and looking for someone actually experienced to help me not look like a damn fool during my interview. (1) Inflation vs. Currency Value: Negative Correlation The relationship between inflation and currency value is by far the most straight forward in my opinion. Inflation decreases the value of currency in purchasing goods, which drives down the currency's worth relative to other currencies. Please let me know if I'm wrong on this. (2) The relationship between inflation and interest rates is making little sense to me. (a) Positive Correlation: On one hand, high inflation causes investors to demand a higher yield on their bonds to compensate. Additionally, higher inflation would cause the prices of the goods that companies sell to increase, reflecting positively in earnings and resulting in faster growth for companies, thus driving down demand for bonds -> lower bond prices -> higher interest rates. (b) Negative Correlation: On the other hand, Investopedia says that In general, when interest rates are low, the economy grows and inflation increases. Conversely, when interest rates are high, the economy slows and inflation decreases. Above are evidenced by the fact that the Federal Reserve uses higher interest rates to discourage spending and thus decrease inflation during periods of rapid expansion, and lower interest rates to encourage spending and increase inflation during periods of contraction. What gives? Which one is right? (3) Interest Rates vs. Currency Value: Positive Correlation All I know about this one is that its for some reason accepted that higher interest rates tend to attract foreign investment, which requires demand for the country's currency, thus higher interest rates beget higher currency value. But at the same time, wouldn't higher interest rates constrain the rate at which companies are able to expand, thus reducing foreign investment in equity markets? Wtf? I'm getting quite worried at this point because I keep hearing different things on these relationships - the only consistent one refers to inflation and currency value. Would really appreciate some opinions from those more knowledgeable than I am.   submitted by   /u/FreemanRuinedSeasons [link]   [comments]
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  46. Europe Markets: European stocks inch higher as markets look to key U.S. inflation data (13/04/2021 - Market Watch)
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  47. Are lithium mining stocks a hedge against inflation? (18/05/2021 - Reddit Stocks)
    If commodities like gold and mining stocks tend to go up during periods of higher inflation, then would lithium mining be a good hedge against inflation? Independent of inflation, it has a lot of near future demand regarding EVs, 5G phones, etc. What do you guys think?   submitted by   /u/JonathanL73 [link]   [comments]
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  48. The Fed: If market thinks we’re not living up to inflation targets that’s ‘a problem,’ says Fed’s Evans (03/03/2021 - Market Watch)
    Chicago Fed President Charles Evans said Wednesday that any doubt in markets about the Fed's commitment to get inflation higher would be a 'problem' and said investors should understand he would even be comfortable with inflation at a 3% rate
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