Lets talk now more about economical things as statistical correlation, stagflation and inflation. Of course financial markets are the key but they needs the door and the door is the economy. What I want to say by that is that correlation between financial markets and economy is inevitable. If economy will suffer a downturn then financial markets are necessary to feel it. If a fall in economy will be very strong then affect to stock market and other capital markets will be dramatic. And otherwise, if economy will grow rapidly then stocks also will rise very fast, especially investments in growth stocks.
So this true, that every investment depends on many economical factors, as GDP growth, retails sales and many others. One of key economical factors also is inflation which shows the price increase for goods and services during some period. The period usually is one month or one year. Inflation is not too much important in practice as long as it is kept in normal boundaries, but if it would turn to hyperinflation the meaning could be catastrophic and the is the answer to ECB (European Central Bank) fears which are ignored by US Central Bank. But in other hand inflation is very important because it determines the actions of the central banks and central banks have critical impact to the financial markets including stocks, bonds and other investments.
The true about inflation is simple. It is good as long as inflation of prices is under control, but if control will be lost then real damages can happen. In reality some moderate inflation is much better than deflation. The worst things that can happen is hyperinflation and stagflation. There is no correlation among these two because they are opposite.
Stagflation means that economy is in stagnation which means there is no growth for a long term and there is high inflation. Both factors factors are very negative and it is a worst thing for the correlation. If those two factors are correlating then economy is in real trouble.
Well, economy is consistently changing thing and there are no constant rules. However, is very probable that high inflation will make a lot of problems for the economy of the country and that will hurt the business, which would drive to the stagnation and it is only one step till stagflation, so we can say that such correlation is probable.
