Does Inflation Hurt my Stock Returns?

February 16, 2022

Does inflation hurt your stock returns? We answer this common question with a recent study of inflation over a 30-year period.

Full Transcript:

Hello, welcome to Arista Advice! Question of the week is one that you probably have thought yourself and have asked, and it is: "Paul, does inflation hurt my stock returns?"

Well, a recent study just came out from Dimensional Fund Advisors. They are an Austin-based asset management firm that we've been using for many, many years. They're really smart people. They came out with some research, and the surprising result is no, no, no! Inflation is actually healthy for the stock returns.

They went back since 1992 and did a one year return on US stocks, and they saw that stocks obviously, since 1992 in the last 30 years, have fluctuated wildly, and their research came back saying that weak returns occurred when inflation was low in some periods. But of the 23 of the 30 years, they were positive. With low inflation, there was not a lot of correlation, but actually with moderate inflation, it helped lift stock prices, using the Standard & Poor's as an index.

As you'll see on this graph, there's highs, and there's lows. History continues to show that the markets go up and markets go down. Don't let the media get to you and cause panic and fear and hysteria in your life because of stock prices and inflation and Ukraine and Germany and pipelines. All of this stuff we've seen before, and we'll see much more of it in the future.

Don't let inflation derail your financial plan. Stay focused on the big picture and know that some inflation is healthy. Hyperinflation is scary and the Federal Reserve is going to get ahead of it and raise some rates, but we need to stay diversified and structured and think long-term in a short-term world. Remember, go to for other tools, tips, and videos to help you live a life of significance.