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Why Do Stock Markets Hate Inflation

Richard S. Warr, North Carolina State University

Stock markets have been on a wild ride recently, plunging one day and then soaring the next. Since its peak in late January, the Standard & Poor’s 500 index has declined more than 10 percent, signaling a market “correction” beyond just a temporary blip.

Pundits have offered many reasons for the biggest stock market swoon in two years. One of the most frequently blamed culprits is inflation, which loosely means an increase in consumer prices over time.

What would prompt something so seemingly banal to send investors into a state of craziness and even panic? A closer look at inflation – a topic I’ve studied closely – and how it affects markets offers some answers. It also hints that an economic slowdown is closer than you may think.
What is inflation?
Inflation is defined as the rate of change in the prices of everything from
Why Do Stock Markets Hate Inflation

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