01.09.2020 - Studies

Stocks and Inflation – It’s all about the interest rate


The extensive support measures in the wake of the corona pandemic could lead to higher inflation rates in the long term. In such an environment, shares are considered an attractive asset class. Rightly so?

From an investor's point of view, the question arises as to which investment strategy should be used to counteract a depreciation of money. Fixed-interest investments do not seem very attractive when inflation rates rise, if rising prices do not result in rising interest rates. However, rising interest rates on fixed-term deposits or coupons for bondholders can also be accompanied by losses in real value. The recent rally in the price of gold could reflect a loss of confidence in paper money that has begun in anticipation of rising inflation rates. However, if interest rates rise along with inflation, the opportunity cost of holding gold also rises, as it cannot pay coupons or dividends. For this reason, in addition to real estate, equities are often seen as a suitable instrument with which it should be possible to preserve one's assets even in times of high inflation.

In the context of the present study it will be investigated which empirical correlation exists between the development of the stock markets and inflation under consideration of the interest level. For this purpose, historical stock market returns within different inflation phases will be examined in the further course.

Download study as PDF (Reading time 20 min)

Related Articles

Legal notice

The information contained and opinions expressed in this document reflect the views of the author at the time of publication and are subject to change without prior notice. Forward-looking statements reflect the judgement and future expectations of the author. The opinions and expectations found in this document may differ from estimations found in other documents of Flossbach von Storch AG. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. This document does not constitute an offer to sell, purchase or subscribe to securities or other assets. The information and estimates contained herein do not constitute investment advice or any other form of recommendation. All information has been compiled with care. However, no guarantee is given as to the accuracy and completeness of information and no liability is accepted. Past performance is not a reliable indicator of future performance. All authorial rights and other rights, titles and claims (including copyrights, brands, patents, intellectual property rights and other rights) to, for and from all the information in this publication are subject, without restriction, to the applicable provisions and property rights of the registered owners. You do not acquire any rights to the contents. Copyright for contents created and published by Flossbach von Storch AG remains solely with Flossbach von Storch AG. Such content may not be reproduced or used in full or in part without the written approval of Flossbach von Storch AG.

Reprinting or making the content publicly available – in particular by including it in third-party websites – together with reproduction on data storage devices of any kind requires the prior written consent of Flossbach von Storch AG.

© 2020 Flossbach von Storch. All rights reserved.