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Will Inflation Hurt Stock Returns. Not Necessarily.


Worried about inflation and how your financial plan will be impacted?


Our clients may wonder whether stock returns will suffer if inflation keeps rising. Here’s some good news.


A look at equity performance in the past three decades does not show any reliable connection between periods of high (or low) inflation and US stock returns.


Since 1992 the S&P 500 delivered average annualized return of 8.1% - after adjusting for inflation.


Going back to 1926, the annualized inflation-adjusted return on stocks was 7.3%.


Inflation isn’t necessarily bad news for equity investors.


Source: Dimensional

History shows that stocks tend to outpace inflation over the long term - a valuable reminder for our clients concerned that today's rising prices will make it harder to reach their financial goals

FOOTNOTES

1.Real returns illustrate the effect of inflation on an investment return and are calculated using the following method: [(1 + nominal return of index over time period) / (1 + inflation rate)] − 1. S&P data © 2021 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.


2.Based on non-seasonally adjusted 12-month percentage change in Consumer Price Index for All Urban Consumers (CPI-U). Source: US Bureau of Labor Statistics.


DISCLOSURES

The information in this document is provided in good faith without any warranty and is intended for the recipient’s background information only. Past performance is no guide to future performance. Your fund value can go down as well as up. 

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