Will Inflation Hurt Stock Returns? Not Necessarily. By DFA Australia Limited.

Investors may wonder whether stock returns will suffer if inflation keeps rising. Here’s some good news: Inflation isn’t necessarily bad news for stocks.

• A look at equity performance in the past three decades does not show any reliable connection between periods of high (or low) inflation and Australian stock returns.

• Since 1991, one-year returns on stocks have fluctuated widely. Yet the weakest returns can occur when inflation is low, and 24 of the past 31 years saw positive returns even after adjusting for the impact of inflation.

• Over the period charted, the ASX 300 posted an average annualised return of 7.65% after adjusting for inflation.

History shows that stocks tend to outpace inflation over time—a valuable reminder for investors concerned that today’s rising prices will make it harder to reach their long-term financial goals.