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Published: Jun 03, 2022 8 min read

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Stocks have been struggling for much of 2022, and inflation has shot to a 40-year high. But how exactly are the two related? Experts say that while inflation undeniably has an impact on the stock market, it's a lot more complicated than basic cause-and-effect.

There's no magic lever that automatically makes stock prices go down when inflation rises. Yet when the U.S. Bureau of Labor Statistics releases its consumer price index reports on the cost of goods and services, investors tend to react.

In many ways, however, investors may not be responding to inflation as much as to what they think the Federal Reserve will do because of inflation.

"The expectation of what the Fed is going to do down the road is essentially feeding into the current stock price," says Kairong Xiao, a financial economist and assistant professor of business at Columbia Business School.

Inflation was above 8% in both March and April — the highest it's been since the 1980s. Here's how that inflation is impacting the stock market.

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