inflation v.s. stock and bond

CFA Level III
#1

<1> so based on SS11 stock is good inflation hedge, but based on SS6’s theory, if inflation increases, the direction of stock price would be uncertain - seems inconsistent here… <2> if inflation increases, wouldn’t interest likely to decrease? therefore pushing bond price up???

#2

no inf up, (if real rates=) nominal up

#3

good point, dude think the point is the nominal rate is up (due to higher inflation rate), therefore, a higher yield required -> bond price down… any idea about the stock question?

#4

inflation and stock prices are negatively related. Where does it say that stocks are a good inflation hedge? it is good for growth, but not as inflation hedge

#5

Over the long term, stocks are good inflation hedges. Short term it’s inconclusive.

#6

comp_sci_kid Wrote: ------------------------------------------------------- > inflation and stock prices are negatively related. > Where does it say that stocks are a good inflation > hedge? it is good for growth, but not as inflation > hedge schweser had that comment, I remember i read it somewhere for sure…

#7

for unexpected inflation up, either is a good hedge. for excepted, equity may be a good hedge.

#8

CFA Vol 4 P.86 Stocks are a better inflation hedge vs. conventional bonds informally an asset is an inflation hedge if its returns are sufficient on avg to preserve purchasing power during periods of inflation.

#9

schweser says: pg 122 bk 3 “An inflation hedge is an asset whose nominal returns are positively correlated w inflation.”…(discuss bonds are poor inflation hedge)…“The historical evidence in the US and other countries indicates that equities have been a good inflation hedge.” i agree that stocks are a good inflation hedge over long time periods (i.e. 20+ years) because of the high absolute return. but are they positively correlated to inflation? i would think high inflation = restrictive monetary policy = bad for stocks

#10

ChiTownBull Wrote: ------------------------------------------------------- > CFA Vol 4 P.86 > > Stocks are a better inflation hedge vs. > conventional bonds > > informally an asset is an inflation hedge if its > returns are sufficient on avg to preserve > purchasing power during periods of inflation. they are better inflation hedge yes, but if you recall most companies cant pass inflation through to customers, so stocks will underperform in periods of expected inflation. Bonds are bad for unexpected inflation, i dont see how they can be good?

#11

comp_sci_kid Wrote: ------------------------------------------------------- > ChiTownBull Wrote: > -------------------------------------------------- > ----- > > CFA Vol 4 P.86 > > > > Stocks are a better inflation hedge vs. > > conventional bonds > > > > informally an asset is an inflation hedge if > its > > returns are sufficient on avg to preserve > > purchasing power during periods of inflation. > > they are better inflation hedge yes, but if you > recall most companies cant pass inflation through > to customers, so stocks will underperform in > periods of expected inflation. > > Bonds are bad for unexpected inflation, i dont see > how they can be good? exactly…they are better than bonds but thats not very impressive is it. it comes in the material before alt inv are discussed…

#12

RE and Commodities are best for inflation hedges IMHO

#13

^CSK only Energy & ____ commodities. Not Agriculture.