The most important issues in the stock market valuation is the relationship between stock prices and inflation. Often in this context, the opinion is expressed with rising prices and increased corporate profits and stock prices. Is this fact or context Illusion?
To assess the effects of inflation on the investment performance of stocks investors access often resort to the experience immediately after the two world wars. Those periods were marked by sharp devaluations in Europe. Here were the owners of shares to a much lesser degree of inflation and monetary reforms affected than, for example, holders of fixed-income Securities or cash that their principal part completely have lost.Is an equity owner that is hedged against inflation risks? The economic Logic says at first sight for it. After all, rising prices mean for the Companies increasing sales revenues and - if the cost is not a greater Increasing extent - also increasing profits. Often, in this context also noted that after a share as a physical counterpart Capital stock stands, which constitutes a real size and its value to inflation can not be eroded. The nominal value of the company must therefore in the level of general inflation are growing.
