Traders,

If you want your wealth to keep up with or even outpace inflation, then stocks have historically been the best answer. So says Goldman Sachs Asset Management which put out the delightful chart below. It shows the percent of time that every major asset class has outperformed inflation over a given time horizon. Stocks, or equities, are represented by the black line, and their ability to trounce inflation rises with time. At 20 years, it hit 100%.

So, how do they do it?

Pricing Power.

The titans of industry that comprise the S&P 500 have the ability to pass price increases due to inflation onto their customers. This, in turn, allows their profits to rise beyond the pace of inflation. And in the long run, corporate profits are the primary driver of stock values.

This phenomenon doesn’t necessarily play out every single quarter. In the short run, the stock market is prone to overreaction and temper tantrums. But over years and decades, stock prices eventually climb back to reflect the consistent, inflation-beating rise in earnings. This time will prove no different.

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Video Of The Day: Swing Trading 101 [webinar replay]

Watch Coach Matt Justice in this fun and informative #tradingforbeginners webinar that will teach you everything you need to know about the art of Swing Trading. Come and learn about the real potential Swing Trading can bring to your #optionstrading and #stocktrading.

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Chart of the Day: Stock beats Inflation

With time, stocks > inflation.

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Tales of a Technician

Why Stocks Beat Inflation

Indeed, stocks aren’t just a good vehicle to fight inflation; they’re the BEST.

Today’s line up

Traders Lounge 11 AM EST

Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.

The Coaches Show 8:30 PM EST

This is our weekly MasterMind group. Join the coaches tonight, 8:30 PM EST to discuss the markets and help you prepare for the week.

Halftime Report 12:30 PM EST

The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.

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