Like the title says. I don’t get it.
Inflation will drive up costs, of course, but also prices. So as long as a company maintains the same margins, dollar revenue and profit would increase with inflation.
Furthermore, tech companies’ biggest expense is typically engineering, not raw materials so they are far less affected by rising steel or food prices.
Further-furthermore, companies holding debt benefit from inflation because it devalues their debt.
The only thing I can see is that investors move away from stocks during inflation, but that too doesn’t make sense – cash sitting on the sidelines devalues quickly during inflation and your investment is much safer in a company producing income, whose income will rise commensurately with inflation than in fixed income investments that will continue to devalue.
So… can someone help out my aging brain and please explain why inflation driving down the price of stocks?
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