\u201cUK inflation hits 40-year high<\/strong>\u201d<\/p>\n \u201cCall on Bank of England for 3% interest rate<\/strong>\u201d<\/p>\n It\u2019s enough to make any of us reconsider if we\u2019re doing the right thing. But while it\u2019s natural to be interested in market movements, history shows that keeping your nerve, staying the course and sticking to your plans are the safest ways through any uncertainty.<\/p>\n By far the biggest of the worries facing many of you is rising inflation. But are you right to be worried?<\/p>\n Should you be worried about inflation? After all, it\u2019s bad for stocks<\/strong><\/p>\n Hopefully you\u2019ll have a large proportion of your pension and ISA funds invested in a diversified fund of global companies. It\u2019s one of the most reliable ways to protect and grow your money over the long term.<\/p>\n But spikes in inflation, like we\u2019re seeing right now, tend to be seen as bad for share prices. The same share prices that determine the value of your pension, your ISA, and your other investments.<\/p>\n Post-pandemic supply pressures, Ukraine and years of printing money have conspired to push up inflation.<\/p>\n There’s evidence to suggest that inflation is starting to calm down but the fact remains – it’s become more expensive for companies to produce goods causing prices to rise.<\/p>\n How consumers react to this depends on many factors (not least interest rate policy), but one outcome is that they choose to buy less. Sales drop, profits follow, growth prospects soon slow and share prices fall in anticipation.<\/p>\n So yes, on the surface it looks like inflation is bad for the stock market. But does that really hold true?<\/p>\n Past performance is no guarantee – but it offers hope<\/strong><\/p>\n The theory is simple enough, and rightly suggests that higher inflation is bad for markets.<\/p>\n But sometimes common sense and expectations can be misleading. So it\u2019s important to look to history.<\/p>\n Dimensional Fund Advisors conducted a study of the US Stock Market (S&P 500) over a thirty year period to understand the a correlation between inflation and stock prices:<\/p>\n The Real Thing <\/strong><\/p>\n Annual inflation-adjusted returns of S&P 500 Index vs inflation, 1992-2021<\/em><\/p>\n What conclusions should we draw from this?<\/p>\n There\u00a0 doesn’t seem to be any obvious trend here; inflation and US stock prices appear to act completely independently of one another.<\/p>\n In fact, the study showed that the stock market posted an average annualised return of 8.1% (after adjusting for inflation) over the same 30 year period. Go back almost a hundred years, to 1926, and the average return is 7.3%.<\/p>\n Even as inflation and market prices fluctuate, over time the stock market has delivered consistent returns.<\/p>\n Form is temporary, (asset) class is permanent<\/strong><\/p>\n Despite the convincing narrative offered by the financial talking heads in the press, no-one can know what will happen to share prices tomorrow, next week, or next year.<\/p>\n What we do know is that the share prices of the world\u2019s leading companies tend to outpace inflation over years and decades.<\/p>\n But to ensure that happens, you need to stay the course even when it feels very uncomfortable.<\/p>\n Let\u2019s be clear. What\u2019s happening right now is concerning. It\u2019s ok to worry a little bit. But you should always remember that nothing is permanent. Take the right advice, keep faith in real <\/em>assets like company shares and property, and always stick to your plan.<\/p>\n And remember – financial headlines are there to sell newspapers, not help you achieve your goals and financial independence.<\/p>\n That\u2019s our job.<\/p>\n Past performance is no guarantee of future results.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" It\u2019s easy to worry about your finances. All you need to do is walk to the nearest newsagent or open up the news app on your phone. \u201cFears mount over health of UK economy after sharp sell-off in markets\u201d \u201cUK inflation hits 40-year high\u201d \u201cCall on Bank of England for 3% interest rate\u201d It\u2019s enough … Continue reading “One Way To Soothe Inflation Worries? Stay The Course”<\/span><\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.arkenstonewealth.co.uk\/blog\/wp-json\/wp\/v2\/posts\/1489"}],"collection":[{"href":"https:\/\/www.arkenstonewealth.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.arkenstonewealth.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.arkenstonewealth.co.uk\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.arkenstonewealth.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=1489"}],"version-history":[{"count":6,"href":"https:\/\/www.arkenstonewealth.co.uk\/blog\/wp-json\/wp\/v2\/posts\/1489\/revisions"}],"predecessor-version":[{"id":1580,"href":"https:\/\/www.arkenstonewealth.co.uk\/blog\/wp-json\/wp\/v2\/posts\/1489\/revisions\/1580"}],"wp:attachment":[{"href":"https:\/\/www.arkenstonewealth.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=1489"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.arkenstonewealth.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=1489"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.arkenstonewealth.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=1489"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/www.arkenstonewealth.co.uk\/blog\/wp-content\/uploads\/2022\/06\/Screenshot-2022-06-22-at-19.56.54-300x278.png\")
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