Price inflation is a threat to investors, but it can be managed effectively. To do so, it is essential to screen out the fear-inducing noise in the media, which can encourage impulsive decision-making. Instead, investors should examine the data, inflation’s various impacts, and the opportunities available.
As of this writing, it appears likely that the markets will deliver negative returns in both bonds and stocks for the second consecutive quarter. Recent inflation is a key factor behind this highly unusual phenomenon.
As usual, the media has piled on. Explanations for the inflation spike differ (some are very bad), as do forecasts of future inflation. Some project prolonged price rises, citing unprecedented monetary expansion, while others blame transitory events, most notably supply chain disruptions and surging oil prices. These mixed messages can only confuse and frighten household investors.
An increasingly politicized citizenry does not help. According to the Wall Street Journal, the widely cited University of Michigan Survey of Consumers found that, “In October 2020, before the presidential election, members of both parties expected roughly 3% inflation over the next year. By this May, Republicans expected 9.6% inflation on average but Democrats only 4.5%.”
Also In This Issue
Bonds Duration, Interest Rate Risk And Price Inflation
Inflation, Recessions, And The Stock Market
Five Simple Ways To Support Children And Grandchildren Financially
The High-Yield Dow Investment Strategy
Recent Market Statistics
The Dow Jones Industrials Ranked By Yield
Asset Class Investment Vehicles