Inflation has been one of the major players in the global economy in recent years. From post-pandemic spikes to the efforts of central banks to contain it, its effects have been felt in all sectors, especially in the stock markets.

As 2025 unfolds, many investors are wondering: what awaits stock indices after this inflationary period? Will they return to pre-pandemic growth levels? Will they continue to show volatility? Is it a good time to enter or is it better to wait?

In this article we analyze the historical performance of indices following inflationary cycles, evaluate current macroeconomic trends and offer clues to interpret the future of indices such as the IBEX 35, the S&P 500 or the German DAX.

The impact of inflation on stock market indexes

Inflation is no stranger to stock market performance. In fact, its effects can be profound and often contradictory. In the short term, high inflation generates:

Interest rate hikes by central banks.
Reduction in consumption and business investment.
Lower attractiveness of stocks versus bonds and fixed income.

All this tends to negatively affect indices, especially those composed of companies with high leverage, narrow margins or strong dependence on domestic consumption.

However, in the medium and long term, certain sectors may benefit: energy, commodities, infrastructure or technology companies with pricing power tend to be more resilient or even thrive in inflationary environments.

What happened in the past? Historical behavior after inflation

To understand what may lie ahead, it is useful to look at what has already happened. In recent history, we find several examples:

1970s: after the oil crisis and soaring inflation, markets experienced several years of declines or stagnation. The Dow Jones, for example, took more than a decade to recover its real (inflation-adjusted) level.
Financial crisis of 2008: although its origin was not inflationary, the subsequent stimulus generated a cycle of sustained growth in rates, driven by low rates and liquidity.
Post-COVID period: index recovery was initially strong, but the return of inflation in 2021-2022 generated significant corrections in 2022 and high volatility in 2023-2024.

In general, the pattern is clear: after a phase of adjustment, the indices tend to regain strength, although not all at the same pace or with the same intensity.

Macroeconomic forecasts for 2025

Currently, the major international organizations are projecting a gradual deceleration of inflation in Europe and the United States, together with a stabilization of interest rates at still moderate levels.

This implies three possible scenarios:

Stability with moderate growth: central banks avoid further rate hikes and companies adjust their structures, resulting in a gradual revaluation of the indices. This is the base scenario of many analysts for 2025.
Cyclical rebound: sectors punished during the inflationary years (such as technology, consumer goods or real estate) could lead a new stock market rally.
New inflationary tension: if consumption is reactivated or an external shock (energy, geopolitical) occurs, inflation could rise again, generating new corrections in the markets.

Which sectors and regions are expected to lead?

Among the indices with the best projection in a post-inflationary environment are:

S&P 500 (USA): the great weight of the technology sector and the resilience of its economy continue to attract investors.
EuroStoxx 50: structural reforms in the eurozone could boost industrial, energy and financial companies.
Emerging indices: especially in Asia, where inflation has been more controlled and growth remains active.

In terms of sectors, the most optimistic forecasts focus on:

Automation technology and AI.
Infrastructure and green energy.
Pharmaceuticals and health.
Construction and real estate adapted to the energy transition.

What can investors do?

In the face of uncertainty, it pays to maintain a flexible and well-informed strategy. Some key tips:

Diversify across regions, sectors and assets.
Review portfolios and adjust equity exposure according to your risk profile.
Study index futures as a tool to anticipate market movements.
Do not get carried away by momentary panics: stock market cycles are inevitable, but in the long term, markets tend to grow.

Conclusion

Inflation has shaken the foundations of the market in recent years, but it has also opened up new opportunities. With inflation moderating and rates stabilizing, 2025 could be a key year for the resurgence of stock indexes.

As always, the key is to be informed, analyze trends and make strategic decisions. The future of indices is not written, but it can be anticipated with the right tools.

What’s in store for stock indexes after inflation?