What Happens to Stocks When Inflation Is High? (How Does Inflation Affect Stocks — Strategy)

Backtests reveal that inflation is bad for stocks in the short term. In the long run, though, companies should be able to pass on increased prices to consumers and resume their uptrend.

In this post, we look at inflation and how it affects stocks. We backtest the following trading rules:

➨ When the 10-year yield crosses above its 5-weekly moving average, we buy S&P 500 (rates are increasing).

➨ When the 10-year yield crosses below its 5-weekly moving average, we sell S&P 500.

The backtest returns the following equity curve as shown below.

You can find more info about this trading strategy here:

https://www.quantifiedstrategies.com/what-happens-to-stocks-when-inflation-is-high/