Is It Time to Worry About Inflation?

Should I be concerned that inflation is on the rise? What can I do to safeguard my savings from increasing inflation?

The consumer price index (CPI) grew by 5.3 percent in the 12 months ending in August 2021, according to the US Bureau of Labor Statistics. Over the last year, the prices of all non-food and non-energy commodities grew by 4.0 percent. Inflation has risen faster than it has in almost a decade. In the decade before, the yearly growth in the CPI stayed lower than 2%. For several of those years, the percentage was even lower than 1%.

The rising cost of things has many people wondering what we’re doing to safeguard their investments.

Recently, a coworker of mine shared this interesting graph with me:

When it comes to protecting against inflation, investing in equities has shown to be an effective strategy regardless of the interest rate situation.

Small-cap equities have historically performed well during times of rising inflation, according to the available statistics.

When inflation rises, the economy will be influenced by a slew of various factors, but stocks are a solid defence against inflation since businesses pass along the rising costs of materials and products to customers. Consumers will have to pay more, and investors will see an increase in their investments as a result of the rising inflation rate.

Inflation is being closely monitored by members of our research team. Your Merriman investment portfolio is already well prepared for the possibility of inflation continuing to rise. Small-cap stocks make up a large portion of our holdings. When appropriate, you should include REITs and inflation-protected bonds in your portfolio, as well as maintain your bonds at a “short” or “intermediate” duration, to help safeguard your portfolio from stock market declines. We utilize cash flow modeling to see how each of our customers would be affected if inflation remained high.

You and your adviser have worked together to identify the best stock allocation for your circumstances. We think the best strategy to handle the continuous and shifting dangers presented to your investment portfolio is to maintain the correct combination of “offense” and “defense.” Contact us if you have any questions about how increasing inflation can affect your own financial circumstances or if you need help figuring out whether you have the correct balance.

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