Will the inflation the U.S. economy is currently experiencing be fleeting or here for years to come? Our Chief Investment Officer, Timothy Chubb, shares his insight on inflation, supply and demand imbalances and the labor market in this 11-minute video.

If you are interested in Timothy’s review of second quarter market performance or to view the entire recording from the Investment Currents WebEx, visit: …(read more)

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Investment Currents: Is Inflation Here to Stay

In recent months, there has been much talk about the possibility of rising inflation, and its potential impact on the economy and investment markets. With the ongoing recovery from the COVID-19 pandemic and unprecedented levels of government stimulus, many investors are wondering if inflation is here to stay.

Inflation, the rate at which the general level of prices for goods and services is rising, is a key indicator of the health of an economy. Historically, when inflation is high, interest rates tend to rise as central banks attempt to cool down the economy and prevent prices from spiraling out of control. This in turn can have a significant impact on investment markets, as higher interest rates can reduce the present value of future cash flows, leading to lower stock prices and reduced demand for bonds.

There are a number of factors contributing to the current inflationary concerns. First, the massive government stimulus in response to the pandemic has injected trillions of dollars into the economy, leading to increased consumer spending and rising prices. Additionally, supply chain disruptions and shortages of goods due to the pandemic have also contributed to price increases.

Furthermore, as the economy continues to reopen and people return to their pre-pandemic activities, demand for goods and services is expected to surge. This increased demand, combined with ongoing supply chain issues, is likely to put further upward pressure on prices.

So, is inflation here to stay? While the current inflationary pressures are real, there is still debate among economists and investors about whether the trend will persist in the long term. Some argue that the current surge in inflation is transitory and will ease as supply chain issues are resolved and the economy settles into a new normal. Others believe that the combination of unprecedented government spending and increasing demand will lead to sustained inflation.

For investors, navigating the potential impact of inflation on their portfolios is crucial. Inflation can erode the real value of investment returns, especially in fixed income assets such as bonds. As a result, many investors are considering allocating more of their portfolios to assets that historically perform well during inflationary periods, such as real estate, commodities, and certain stocks.

Additionally, investors are closely watching central banks for any signals of impending interest rate hikes, as higher rates can have a significant impact on the performance of stocks, bonds, and other assets. As always, diversification and a long-term investment strategy remain key principles for weathering potential inflationary storms.

In conclusion, while the current inflationary pressures are real and have the potential to impact investment markets, there is still uncertainty about the long-term trajectory of inflation. Investors should monitor the situation closely and consider adjusting their portfolios to mitigate the potential impacts of rising prices. As always, consulting with a qualified financial advisor can help investors navigate these uncertain times and make informed investment decisions.