Report
Inflation is not necessarily bad for equities, it may even be good
As we enter 2022, we often hear that one of the risks to the equity markets is inflation. Inflation will actually be high in the United States and the euro zone, probably until the summer of 2022, but this is not necessarily negative for equities, on the contrary. This is because: Nominal wages are far from being fully indexed to inflation; real wages therefore decline as long as inflation is high, which is positive for corporate profitability and therefore for share prices; Nominal interest rates hardly follow inflation upwards; real interest rates are therefore very low as long as inflation is high, which is also positive for the rise in share prices. We can therefore see that in the current configuration, inflation will drive share prices up and not down. It should not be forgotten that, if nothing else, a rise in production prices is positive for companies.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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