bubble; Bringing black inflation to the markets! – Tejarat News

According to Tejarat News, we cannot ignore the fact that “inflation” and “inflation outlook” are the main keywords in interpreting the trends and movements of Iran’s markets. Although these two important factors follow the growth and efficiency of the markets in terms of price, but this same process sounds the alarm of the occurrence of another terrible phenomenon called “bubble” in the markets, which can turn the paradise of profit making into a black hole of losses.

With the growth of the inflation rate last year and the strengthening of inflationary expectations due to the reduction of hope for the improvement of the economic and political conditions, the markets became extremely turbulent; As a result, the currency market conquered new and unseen channels and reached high price levels. In this way, the dollar of 60 thousand tomans and the euro of 70 thousand tomans were easily opened to the Iranian economy.

Infectious swelling disease

The inextricable link between currency and gold caused the precious metals market to be quickly affected by this upward trend. Accordingly, Imami coin touched the channels above the corridor of 30 million tomans and 18 carat gold was able to conquer the peak of three million tomans.

But what made the sweet yield of the gold and coin market bitter for investors last year was the “bubble” disease, which always spreads to the financial and capital markets due to the inflation virus. It was the same dangerous disease that crashed the stock market in 1999 and forced a long recovery period of 2.5 years.

Now the gold and coin market is undergoing an imposed recovery. The market is freezing, the prices are stuck and forcefully close to the higher channel; An attempt which, of course, has not led anywhere.

At the same time, the economic signs and price growth indicate that inflation is still the first word in the evolution of Iran’s economic indicators! But does this mean that the effect of inflation in the markets will diminish? The answer is no!

Bubble alarm

By invading the gold and dollar markets last year, this year inflation has reached the stock and housing markets; Housing prices, which had started growing since the beginning of the year, are now ready to move rapidly in the trading season. The stock also started this upward path with the stimulus of inflation from the previous year and these days it has reached its peak. It is expected that this market will continue to move forward with inflation, at least until the eve of the assembly season.

Although the stock market currently hosts valuable companies that draw good returns for investors, we cannot ignore the leverage of inflation as the driving engine of this market. In this way, it can be claimed that inflation imposes an interesting double effect on the market economy.

On the one hand, inflation is the beginning of a dangerous cycle of price growth and market excitement, and on the other hand, its effect is referred to as profit and efficiency! A profit that might be better called black profit for some markets!

Perhaps only in the two productive markets of housing and stocks can this agency of growth be viewed a little more positively; Because sometimes it causes more mobility of market players and production growth. But this trend is also a double-edged sword that will show itself in the housing market under the title of reduced purchasing power and in the stock market under the title of bubble.

The stock bubble is the alarm that traders and capital market investors should pay attention to now. The same voice that was not heard in 1998 and 1999 and now may spread the trap of loss for investors again.

Dual behavior of the stock market against inflation

Although, as mentioned, inflation acts as the driving engine of the stock market, it should not be overlooked that the stock market can always act as a solid shield against inflation.

In other words, the stock market will have a dual behavior against inflation. On the one hand, the stock market uses inflation as the fuel for its movement, and on the other hand, it can control its increasing growth and the increase in inflationary expectations in other markets. Accordingly, the stock market is also referred to as an inflation shield.

The capital market, as a pillar of production financing, can not only inject stray money into companies and increase their productivity, but it will also give investors a good return. Of course, this yield will be the share of both long-term investors and short-term investors who only buy and sell stocks.

This market especially slows down the movement of the inflation engine and reduces the increasing excitement in the financial and commodity markets. In a way that can prevent the repetition of the conditions that we witnessed last year in the currency, gold and coin market.

However, if excitement penetrates the stock market, the stock market itself will become a victim of inflation and inflationary expectations. A bitter experience that happened once in 1998 and 1999 and may be repeated this year. To avoid this trap, investors should invest in the stock market this time with an analytical view and devoid of excitement.

Instruments such as funds and portfolio managers, which were neglected by market managers and investors in the past years, can be attractive for non-professional investors to obtain returns from this golden opportunity.

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