Putting inflation and the markets into perspective
A highly diversified portfolio keeps our focus on the long term.
Article published: March 18, 2022
We share the concerns of many around the world over the escalating conflict in Ukraine, and our thoughts are with all those affected by the war. Beyond the human toll, there are secondary effects of the conflict, and you may have聽questions about inflation听补苍诲听market volatility. Let鈥檚 look beyond the headlines and put inflation and market volatility into perspective.
On March 10, the government reported that U.S. consumer inflation remained at a 40-year high in February. We all have felt the pinch at the gasoline pump, as the national average price of a gallon of regular gasoline is now $4.27.*
While news of Russian oil sanctions and high gas prices makes headlines, there are several factors driving inflation higher. The U.S. economy experienced strong economic growth and a robust labor market coming out of the Covid-19 pandemic, which increased inflationary pressures even before the聽Russian-Ukraine conflict.
Looking ahead,聽we expect market volatility to continue, particularly given the broad range of possible outcomes of the war in Ukraine. What does this mean for you? Ideally, your portfolio should consider a wide range of economic and market scenarios, including sharp market declines and recoveries.
The reality of inflation is one reason why 蜜穴视频 portfolios are highly diversified and include equity allocations. Equities can be volatile in the short term, but they have been an聽effective inflation hedge聽over time. We are allocating our clients鈥 investments to seek returns that we expect to exceed inflation over the long run. Keep in mind that if your聽long-term financial goals聽have not changed, neither should your portfolio allocations.
Meanwhile, inflation itself is just one factor when planning for the future. It may be helpful to consider:
- The higher-than-average inflation we鈥檙e experiencing right now could be relatively short term, and you may be several years away from retirement.
- 驰辞耻谤听谤别迟颈谤别尘别苍迟听could last 20 or 30 years, so even if you鈥檙e about to retire or are already retired, a year or two of heightened inflation isn鈥檛 a big part of your total retirement years.
Of course, we鈥檙e all feeling the effects of inflation right here and now. If you have questions about how to handle your finances during this time,聽connect with one of our independent financial planners. We have helped clients navigate through a range of economic and market conditions, including the 1991 Gulf War, 9/11, the global financial crisis of 2007-2009, and most recently, the pandemic. We will continue to help our clients weather this storm and any that may follow.
* Based on AAA calculation of national average price of gallon of regular gasoline as of March 18, 2022: $4.274. ()
Watch: How should investors tackle inflation and rising interest rates?
Investing strategies, such as asset allocation, diversification or rebalancing, do not ensure or guarantee better performance and cannot eliminate the risk of investment losses. All investments have inherent risks, including loss of principal. There are no guarantees that a portfolio employing these or any other strategy will outperform a portfolio that does not engage in such strategies.
An index is a portfolio of specific securities (such as the S&P 500, Dow Jones Industrial Average and Nasdaq composite), the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index.
Past performance does not guarantee future results.
