[bruxis]

It's more difficult to wrap our heads around, but stocks face "value inflation" much like currencies do. You can think of stocks similar to a currency exchange to the extent that as money gets pumped into one side (in this case, the securities market, via liquidity injections) the price represented by the other side (USD) goes up, but the value of the asset may actually be declining.

Many of the securities that are at their December 2019 valuations are in a much worse state today than they were then. Stores are closed, manufacturing faces significant delays. Employees are let go or furloughed.

This means the "item" that you're paying for today with the same USD that you may have spent in December is of considerably lower "quality" compared to then.

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That said, it's an interesting situation as drastic financial crisis typically come with some short term deflation, which we're likely seeing the beginnings of now. Many stores are running discount sales to boost purchasing, effectively lowering consumer goods prices (as a whole). This is a prime example, if it continues, of currency deflation.

However, once all is said and done, depending on how the market moves from here, we may very well see the asset inflation turn into currency inflation and bloom for a bit before more drastic financial policies are needed to curve it.

[danielscrubs]

Value is measured (by currency). Are you referring the combination of inflation in currency and the price to earnings ratio seen here: https://www.multpl.com/s-p-500-pe-ratio ?

[bruxis]

Semantics for sure, but while value is perhaps represented by currency by what people are willing to pay and sell for. Others have different metrics for determining value -- "value investors", for example, measure the "value" of a security quite differently than it's current price.

But to your point, yes, the combination of currency inflation (as seen through the securities market due to liquidity injection, and perhaps not yet seen elsewhere) and changes in PE ratios is roughly what I'm referring to. As earnings drop, if prices remain as high as they are due to this inflation, the ratios should see a spike, not unlike the one seen in the chart linked for 2009.