Post #1539 by WendyBG on the Macroeconomic Trends and Risks board

Personal Finance Topics / Macroeconomic Trends and Risks

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UpNorthJoe asked, "How do stocks do in stagflation ? "

Let's take a look at the nominal and inflation-adjusted S&P500 between 1970 and 1980.

https://www.multpl.com/s-p-500-historical-prices

https://www.multpl.com/inflation-adjusted-s-p-500

The nominal S&P500 stagnated between 1970 and 1980 but the inflation-adjusted value fell.

Let's look at the 10 Year Treasury bond.

https://fred.stlouisfed.org/series/DGS10
https://fred.stlouisfed.org/series/REAINTRATREARAT...

The real yield of the 10 YT was always positive because the bond market vigilantes required a positive yield over inflation. This was true until the Federal Reserve's QE after the Great Financial Crisis.

There was no such thing as a TIPS in the 1970s but nowadays TIPS are guaranteed to yield over the rate of inflation.
Wendy

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