Inflation has a complicated relationship with the stock market. When prices go up, that often means that stocks are one of the things that get more expensive. But a new study from S&P Capital IQ indicates that stock prices don't really suffer until inflation gets much higher than it's running now.
The research showed that since 1948, when inflation is running at between zero and 2 percent, the S&P 500 has increased by a monthly average of 1.1 percent. When inflation is at 2 percent to 4 percent, stocks slow a little, with an average monthly increase of 0.7 percent. With inflation at 4 percent to 6 percent, though, the S&P 500 drops an average of 0.7 percent per month. At a little higher inflation - 6 percent to 8 percent - the effect starts to mitigate. The S&P 500 still fell, but only by 3 percent.
The current consumer price index shows about 2 percent inflation, so we're not really in the danger zone yet. Any higher, though, and it could start to have an effect on stock prices.
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