Mike Shedlock posted a useful chart showing market returns in different inflation environments (via JP Morgan). Shedlock is quick to note some flaws in the chart (primarily valuation), however, I think the chart offers a useful framework for various inflation environments regardless of its flaws (no indicator is perfect). Given the current inflation rate of 2.7% (and rising) we can conclude that the lower left hand quadrant is the current market environment. No wonder commodities and equities continue to outperform….
Source: JP Morgan
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.