Stocks are reacting negatively this week to modestly higher inflation figures, but it’s not at all clear that the current figures are a long-term negative for stocks.
Higher inflation is usually looked on as a negative for stocks because it increases borrowing costs, increases input costs (materials, labour), and reduces standards of living.
But probably most importantly in this market, it reduces expectations of earnings growth, putting downward pressure on stock prices.
US stocks drop as inflation worries persist | Financial Times (ft.com)
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