Will Inflation Hurt Stock Returns? Not Necessarily

Investors may wonder whether stock returns will suffer if inflation keeps rising. But a look at equity performance in the past three decades does not show any reliable connection between periods of high (or low) inflation and US stock returns.

• Stock returns can be strong, or weak, or in between when inflation is high. For example, returns were relatively strong in 2021 but poor in 2022.
• Twenty-three of the past 30 years saw positive stock returns even after adjusting for the impact of inflation.
• Over the period charted, the S&P 500 posted an annualized return of 7.6% after adjusting for inflation.

History shows that stocks tend to outpace inflation over time—a valuable reminder for investors concerned about rising prices.