May 1999 Low inflation has been one of the chief engines behind this long-lasting bull market.
Inflation is a general rise in the price level.
In a low-inflation environment, a dollar holds its value going forward. In a high-inflation period, a dollar s value erodes over time as a rising price level decreases the dollar s buying power. Because investors are willing to pay a premium for growth. A P-E ratio reflects expectations for future earnings growth. The better the expected earnings growth, the higher the P-E ratio, all other things being equal.