Rising Inflation and the Stock Market

There are two main results from rising inflation.

  • A corresponding rise in interest rates.
  • Demand for goods decreases due to higher prices and consumers having effectively less money to spend.

Consequently as a rule of thumb rising inflation is bad for the value of stocks and shares because it is thought that companies will sell less product and therefore become less profitable ... thus shares can often drop in value. This is especially true in economies such as Western Europe and North America which are very dependant on consumer spending.

Money :

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