Moderate Inflation Benefits Equities

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 |  Includes: SPY
by: David I. Templeton, CFA

During moderate periods of inflation, equities tend to generate decent performance results. I posted the below chart in a post, Where To Invest In An Inflationary Environment, in mid-2010. It details the performance of various investment categories based on different inflation ranges going back to 1972.

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From The Blog of HORAN Capital Advisors
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Since mid-year 2010, inflation has been trending higher. The latest year over year report shows inflation running at nearly 3.5%.

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From The Blog of HORAN Capital Advisors
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The blog at Crossing Wall Street selected the below chart as the Overlooked Chart of the Year. The chart compares the S&P 500 Index to the market’s expectation for inflation (the 10-year TIP spread). Of late, there has certainly been a high correlation to higher inflation expectations and the S&P 500 Index return.

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From The Blog of HORAN Capital Advisors
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Determining the true level of inflation is also a frequent topic. The Shadow Government Statistics (SGS) site makes an effort to track data on indexes when the calculation methodology is changed. In 1990, the CPI calculation was changed and a comparison of the current CPI versus the 1990-based calculation can be found on the SGS site.