The experts may not call it inflation, but prices are definitely rising
I’m excited because we’re getting back to a family tradition today. We’re celebrating the Fourth of July holiday by attending both a parade and a fireworks display. I suspect most festivities will be crowded with families reunited and excited about getting out of the house and reconnecting with humanity.
And as we return to the real “normal,” I suspect one of the most talked about topics will be the very noticeable price increase on almost everything. The skyrocketing price of lumber won’t affect everybody. Nor will the mounting prices at the gas pump. But the rapidly rising prices at the supermarket almost certainly will. And right in the middle of grilling season.
Just prior to the holiday, several clients asked me if there were anything they should change with their investments, especially with inflation looming on the horizon. Currently, many economists see mixed indicators and aren’t convinced that future inflation is a certainty. Several technical indicators, including the ten-year U.S. Treasury Bond yield, suggest that inflation isn’t in the cards.
Historically, gold has also been a hedge against inflation. Surprisingly, the price of gold has actually fallen of late. No wonder so many economic experts are baffled. Some believe the current higher prices aren’t an indication of inflation, but rather the result of supply chain issues caused by the pandemic.
I’m not certain what label, if any, is appropriate for the current economic environment. But I do know that you don’t have to look very hard to find higher prices throughout the economy.
Don’t forget that retirement can easily represent twenty to thirty years of your life. So proper financial planning should certain factor in price increases. Just because your income remains steady it doesn’t mean prices are going remain stable over an extended period of time.
Looking back ten years, the price of gasoline wasn’t much different than it is today. Other items, like television sets are not only cheaper, they’re significantly better. But many things cost substantially more, like housing and healthcare. The fact is that there is no set formula that can pinpoint how high or low the price of anything will go.
Our economy is not only driven by supply and demand, but also by the policies established by government. One example of government influence is taxation. Many of the wealthy are relocation from states with high taxes to those with little or none.
Most investors that have a balanced, diversified portfolio probably don’t need to change anything because certain prices have spiked.
Nobody has a crystal ball, including the economic experts who are somewhat baffled. At the end of the day, however, prices do generally drift higher, so plan accordingly.
As we celebrate our nation’s declaration of independence, keep in mind how our founding fathers fought to gain that independence. Initially, every state functioned as if it were its own country with its own currency. It took years under the guidance of Alexander Hamilton to establish a national treasury that utilized just one national currency.
Since then, fortunes have been made and lost. But opportunity has always been there. We have been through periods of both deflation and inflation. But whatever label is put on our economy coming out of the pandemic, I’m confident we’ll be just fine.
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Ken Morris 248.952.1744
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Ken is a registered representative of LPL Financial. Securities and financial planning offered through LPL, a Registered Investment Advisor, member FINRA/SIPC. Ken is Vice-President of the Society for Lifetime Planning in Troy. All opinions expressed are those of Ken Morris. LPL and Society for Lifetime Planning are independent companies. Investing involves risk including loss of principal. No strategy assures success or protects against loss.
