Brian Han: Let's have a look. The question is how does inflation affect stock price? Vanguard World Market ETF was approximately $75 three years ago and it's $86 now, but $75 in 2019 is worth $86 today. Does that mean it's now at the 2019 price or does it not work that way.

That's a really topical, interesting question. I'll do my best. In terms of the first part of that question, I think what it means is that the return that you have gotten from holding that ETF has basically kept up pace with inflation and that the real worth of that investment has not changed. But let me get to the heart of this question, which is how does inflation impact stock prices?

Now, in a nutshell, rising inflation is bad for stock prices, especially if it's accompanied by a very small or very little growth. And so in the real world, inflation, rising inflation pushes up costs for companies. So that eats into the company's profit unless these companies have pricing power to pass on those costs to their customers. And those customers are very rare. So that's the first thing. The second thing is, in the real world, rising inflation leads to rising interest rates because central banks at the end of the day, they exist to use monetary policy to keep inflation in check. So rising inflation, rising interest rates, rising company borrowing costs. So that's bad for stock prices.

Now in the financial market. The impact of inflation is even more insidious. That's because in financial markets, we value companies by discounting their future cash flows to today's price by using a discount factor. And that discount factor, interest rate, is the key determinant of that discounting factor. So when interest rates go up, that discount factor goes up. So when we discount it back, those cash flows, future cash flows are worth less in today's terms and therefore rising inflation, rising interest rates, lower asset prices and therefore lower stock price.

Now over the past decade or so, we've enjoyed stellar returns from the stock market. And I can tell you this the number one key driver for those returns has been unprecedented low interest rates. Now we have a situation where we have inflation accompanied by very, very small or very little growth. And so we now have a problem whereby the previous tailwind of low interest rates is now becoming a real headwind and that is going to be quite challenging for stock prices going forward.