Client costs are up 20% for the reason that finish of 2019. Rates of interest have gone from 0% to five% over the identical time. Monetary circumstances have tightened, and but the inventory market hasn’t damaged. In the event you had identified the long run paths of the 2 most vital macro variables, inflation and rates of interest, you’ll have thought the inventory market can be considerably worse off than it’s right this moment.

Aswath Damodaran defined why shares aren’t down extra on Make investments Just like the Finest with Patrick O’Shaughnessy

If you concentrate on having a low price of capital, it ought to push our worth, however right here is the counter. These low rates of interest additionally instructed me that there was going to be low inflation and low actual progress sooner or later, so, and I projected that progress for these corporations for the long run. I additionally pushed the expansion fee all the way down to replicate those self same views.

So the identical low inflation that pushed rates of interest, and in addition when my progress charges had been low, my pricing energy was decrease, the consequences in a way offset. That’s why my valuations don’t change dramatically. And that’s why I’m not stunned the market hasn’t imploded as a result of if you happen to left every part as is and stored the identical money flows you had two years in the past, and also you raised the low cost fee by 2% or 3% or 4%, which is what now we have, shares must be down 40% or 50%, they’re not.

And the explanation for that’s corporations are versatile. They’re adaptable as inflation comes by way of, guess what they do, they cross that inflation on to U.S. prospects. And the businesses which can be higher suited to doing which can be extra protected in opposition to inflation.

The entire dialog is value listening to. Damodaran riffs on sensible cash, the way forward for lively administration, and a lot extra. Can not advocate it extremely sufficient.