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Inflation may be here to stay

You may have seen the news recently that Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen said in interviews it’s time to retire the term “transitory” when discussing inflation. The Chairman added that while it’s difficult to predict how long the effects of supply chain issues will linger, “factors pushing inflation upward will linger well into next year.”

Not exactly the news any of us wants to hear at the start of a new year. If you're feeling a bit uneasy about inflation sticking around, the best thing you can do is to keep doing what you’re doing. Things like:

  • Save 10 to 15% of your income for retirement.

  • Take advantage of still historically-low interest rates.

  • Meet with your financial planner. After all, that’s why we are here—to alleviate your stress and answer your questions.

During our meeting, we can look at ways to protect your assets from inflation. Those include:

  1. Treasury Inflation-Protected Securities (TIPS): TIPS increase with inflation and decrease with deflation, as measured by the Consumer Price Index. When a TIPS matures, you’re paid the adjusted principal or original principal, whichever is greater. Interest is paid semiannually at a fixed rate.

  2. Commodity Mutual Funds: Like gold, the price of commodities tends to increase during inflation. Think of the corn and wheat that go into a box of cereal. The rising cost of raw materials tends to increase the price of the finished product. Many mutual funds invest in agricultural and energy commodities that can potentially benefit from higher commodity prices.

  3. Equities / Equity Mutual Funds: Companies in inflationary-sensitive sectors such as industrials and materials can potentially benefit in a higher inflation environment. If a company’s activity is producing a commodity, inflation could potentially improve the company’s bottom line. Specialty mutual funds offer such underlying equities within the fund's portfolio.

  4. Real Estate / REITs: Real Estate rentals and values increase when prices do. For REITs, the dividends are an attractive benefit. According to Nareit, REIT dividends have outpaced inflation as measured by the Consumer Price Index in all but two of the last twenty years.

If inflation is a concern, feel free to reach out to me. I’m happy to listen and discuss how you can best tailor your individual investments to weather inflation’s impact in 2022.

This presentation is not an offer or a solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable; however, its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. This presentation may not be construed as investment advice and does not give investment recommendations. Any opinion included in this report constitutes our judgment as of the date of this report and are subject to change without notice. The views expressed are those of the author as of the date noted, are subject to change based on market and other various conditions. Material discussed is meant to provide general information and it is not to be construed as specific investment, tax or legal advice. Keep in mind that current and historical facts may not be indicative of future results. Certain risks exist with any type of investment and should be considered carefully before making any investment decisions. Keep in mind that current and historical facts may not be indicative of future results. The information provided is for educational purposes only and not intended to provide any investment, tax or legal advice. Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website.

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