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The Historical Relationship between Stock Prices and Inflation

With the U.S. deficit so high, what happens to stock prices during high inflation? After all, the expected pay back of trillions of debt dollars is first by the dollar slipping against other currencies (already happening), and as that fails, hyperinflation (not happening, yet). So, here's the history of inflation going back to 1914...note what happens after the expensive wars like WWI, II, Korea, Vietnam...

























Ever wonder what inflation already did to your investments

But, back to the task at hand.  What is the relationship between inflation and stock price?

Let's take one stock, General Motors. The raw, uncorrected for splits and dividends, price of the stock seems most informative. The GM data only goes back to 1962.  You can see clearly that when inflation goes up, stock price comes down.  The huge down in the late 1980s was a 3 for 1 split.  Low inflation was really watching the stock rise. 

Now, to get interesting, here is the relationship between GM average monthly stock price and monthly inflation rate...

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