Inflation and Interest rates Implications for the Stock Market

Stock-Markets / Stock Market 2022 Oct 25, 2022 - 10:37 PM GMT

So inflation is not going significantly lower anytime soon, interest rates are still trending higher which does not bode well for the outlook for stocks. And then on top of that we have a weakening economy, STAGFLATION! Definitely not a time for investors to contemplate gambling on no earnings, even high multiples growth stocks. For the indices, it means downwards price pressure and then followed by a trading range..

Here's another indicator to pile on top of a mountain of indicators that I have been covering over the past few years that has been flashing a RED warning. The S&P real terms dividend yield is now far below anything we have experienced since the early 1980s' inflationary depression.

Real terms dividend rates are another harbinger for lower stock prices or at least sustained stagnation. So whilst stocks do tend to be leveraged to inflation, however that is only if earnings and dividends are able to keep pace with inflation and as we have seen inflation is surging higher whilst dividend yields are not. This is a chart to keep a close eye on for early signs for a the birth of a new stocks bull market, in the meantime the message at best is for a trading range.

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Your watching the British pound burn at the official rate of 10.1% per annum analyst.

By Nadeem Walayat

http://www.marketoracle.co.uk

Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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