Quoted By:
Lower rates also mean savers make less APY on their cash savings, encouraging them to move money out of CDs and money market funds, into the stock market.
The key thing to remember is that inflation affects all prices. We don’t usually think of high asset prices (stocks, homes, commodities etc.) as inflation, but they are. Inflation makes ALL prices go up. Investors cheer when stock prices go up and grumble when food prices go up, but the two are connected.
One more big difference: Not everyone owns stocks. (Last time I checked the numbers, something like 45% of Americans are invested in stocks.) Securities ownership tends to be concentrated among higher net-worth households. They’re more disconnected from the everyday economic realities that affect typical families.
Generally speaking, the stock market is a leading indicator of the economy. Remember 2008? Markets tanked WELL before the real economy went into the toilet. Conversely, when stocks go up while the real economy seems to be struggling, that’s a sign that investors generally think the economy will do better in the future — probably because they expect the Fed to return to an easy-money environment. Which is HIGHLY inflationary! But when you own assets, you get some benefits from inflation as asset prices rise.
Hm
