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The Worst Years in Stock Market - When Inflation Rose and Return Ratios Fell
Aug 14, 2018


When inflation is on the rise you must do the math of 'investor's misery index'.

Take into account the potential rise in inflation and the amount of capital gains tax you will be paying. If the sum of the two is higher than return on equity of a stock, it ranks high on the misery index.

Stocks that fail to pass the return on equity 'hurdle rate' will sooner or later get dumped.

If I look at the stocks in the BSE 100 index, the 3 phases when inflation rose and return ratios fell (1993, 1995, and 2008) were amongst the worst years in stock markets.

Data Source: BSE, www.inflation.eu

This Chart Of The Day was published in The 5 Minute WrapUp - My 4-Point Checklist to Avoid Stocks Like Jet Airways

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