Inflation is not going away any time soon. Here's how top financial advisors are handling it

Asia's Tech News Daily

Shoppers at a New York supermarket on Aug. 11, 2021.Wang Ying | Xinhua News Agency | Getty Images

One looming question for the U.S. economy is how long inflation is here to stay.

Based on recent government data, there is good reason for asking.

The Consumer Price Index, which measures the average change over time of prices paid by urban consumers, had a year-over-year gain of 5.4% in September, the fastest pace in decades.

Meanwhile, the Federal Reserve's preferred measure of inflation, the core personal consumption expenditures price index, climbed to a 30-year high in August, when it was up 3.6% over the previous year.

Officials at the Fed are taking notice, based on recently released minutes from a September meeting, where some said it could last longer than they had assumed.

They're not the only ones who are worried. More than 7 out of 10 of retirement age investors — 71% — said they believe rising inflation will negatively affect their retirement savings, according to a recent survey from Global Atlantic Financial Group.

More from FA 100:
Here's where to invest your money in 2022, CNBC's top advisors say
Here's how to choose the right financial advisor for you
Here's how top financial advisors are hiring young talent

“The big argument right now is how much inflation are we going to get and how permanent will it be,” said James Angel, associate professor of finance at Georgetown University's McDonough School of Business.

Signs of cost push inflation, which is marked by increases in production costs, are cropping up now, just as they did in the 1970s, Angel said.

On top of that, there has been both monetary and fiscal stimulus heaped on the economy. That in itself is going to be inflationary, Angel said.

“We need to buckle up our seat belts,” Angel said. “Inflation is here. It's real.”

Financial advisors who landed on this year's CNBC Financial Advisor 100 list say inflation is a top issue in their work with clients. For many of those clients, it is as much emotional as it is financial.

“A lot of our clients came of age in the '70s, the last time we saw big-time inflation take hold,” said Andy Pratt, partner and director of investment strategy at The Burney Company, which is No. 38 on the 2021 FA 100 list.

The firm, which is based in Reston, Virginia, typically focuses on clients with $1 million to $2 million in investable assets.

Their clients remember prices skyrocketing, long gas lines and not being able to afford things, Pratt said. The perks of high inflation, like higher wages, are not as top of mind, Pratt said.

To help address their emotions, the firm has reminded clients that this is not necessarily a repeat of the inflation they remember, and that it can happen for various reasons.

It also has been coming up with strategic asset allocations to help them stomach inflation, Pratt said.

While that includes some exposure to bonds, the firm is cautious about over-allocating to that asset class. At the same time, they have been leaning towards value stocks over growth stocks.

Meritage Portfolio Management, a boutique portfolio management company that is ranked No. 60 on this year's FA 100 list, also has clients, particularly baby boomers, regularly ask about what the surge in inflation means.

“The big argument right now is how much inflation are we going to get and how permanent will it be.”
James Angel
Associate professor of finance, Georgetown University's McDonough School of Business

Mark Eveans, president and chief investment officer at the Overland Park, Kansas-based firm, said stagflation, which is marked by high inflation and high unemployment, is one of his top concerns.

Notably, cost push inflation, as mentioned by Angel, could be a stagflation trigger. Other experts have also warned stagflation is a key risk to watch for.

The big risk for investors in such an environment is that it would be very difficult to achieve real growth, rather than nominal growth, Eveans said. The '60s to early '80s were a perfect example of that, he said.

“That was not a good time for investors, because they lost real money during that time,” Eveans said.

To address that risk, Meritage has taken the position that inflation is less transitory than some experts have projected.

It is also adjusting the strategies for its portfolios, which it typically builds stock by stock and bond by bond. The firm has increased its exposure to value equities versus growth equities in the past nine months, which Eveans calls an “at the margin change,” rather than a sea change.

Gas prices were more than $4.00 per gallon at a San Francisco gas station on Oct. 12, 2021.Justin Sullivan | Getty Images

In addition, the firm has also turned up allocations to areas including energy, materials and financials, and reduced client exposure to other sectors like consumer staples.

On the fixed income side, Meritage is focusing on safety for both income and principal, said John Wallis, director of fixed income.

That includes a laddered approach to the maturities in the portfolio, as well as a preference for corporate bonds over Treasurys, he said. The firm is also adding treasury-inflation protected securities where it can.

Much of how the story with inflation unfolds will come down to the Federal Reserve, Wallis said.

If the Fed falls behind, inflation could become embedded in the financial system, which would require the central bank to take more aggressive action later on, he said.

“That probably is what I would be most concerned about and would probably surprise investors,” Wallis said.

Internet Explorer Channel Network
Asia's Tech News Daily
News Related

OTHER NEWS

Zo reageert Nederland op nieuwe klap in crisis: ‘Er is geen touw aan vast te knopen'

Sebastiaan Quekel, Carla van der Wal, Edwin Van Der Aa 26-11-21, 20:30 Laatste update: 20:56 Cultuur In de evenementenbranche komen de nieuwe maatregelen als een mokerslag aan. ,,Als branche die ... Read more »

Stores kick off Black Friday but pandemic concerns linger

The fallout from the pandemic continues to weigh on businesses and shoppers’ minds. Read more »

Postbus bv is about more than tax

The Netherlands has long been a sanctuary for the international capitalist, but what is it now? Those who wanted to avoid tax (or pardon: optimize) set up a letterbox company ... Read more »

The world needs more Elon Musks to turn zero-emission planes and ships into commercial reality to help reverse climate change

When Tesla beat expectations in 2017 and delivered 102,000 electric cars to customers, the feat inspired an entrepreneur born in the former Soviet Union to think big: one day, battery ... Read more »

These 8 stocks rose more than 10% each in December month of last three years

The Indian market has been weak for over a month now. The benchmark index Sensex has fallen about 3,000 points, or 5 percent, from its closing high of 61,765 during this period. ... Read more »

Marketers, digital is the new real world

The virtual space is the new real world for marketers. The marketing warfare, therefore, needs to be different from that of the times of our fathers, and it is only ... Read more »

Disney to spend $33B next year on new shows, outspending Netflix

Disney said it will raise its content spend to $33 billion in fiscal 2022, outspending rival, Netflix. AaronP/Bauer-Griffin/GC Images Disney said it plans to amp up what it spends on ... Read more »

China reportedly pressuring Didi to delist from NYSE

China‘s powerful Cyberspace Administration of China has asked Didi to take the company off the New York Stock Exchange due to worries about leakage of sensitive data, Reuters reports. SOPA ... Read more »

Wipro's culture is changing but values will not: Rishad Premji

Rishad Premji “Stay humble, stay hungry” was an advice that Rishad Premji always followed, given by his father Azim Premji, said Rishad Premji while speaking at an event on November ... Read more »

Oil plunges 10% on new coronavirus variant concerns

crude oil. Representative Image Oil prices plunged more than 10 percent on Friday, the largest one-day drop since April 2020, as a new COVID-19 variant spooked investors and added to ... Read more »

PostNL works council loses case against postal company

Photo: ANP Thousands of PostNL employees are not entitled to, for example, certain paid breaks and a number of other extra allowances. The works council of the postal company had ... Read more »

OPEC+ reportedly does not want to further expand production

Photo: ANP The countries of the oil cartel OPEC and allies such as Russia are thinking of canceling the planned easing of oil production for January. That writes Bloomberg news ... Read more »

P&G recalls certain Old Spice, Secret products as it suspects presence of cancer-causing chemical

Procter & Gamble Co (P&G) (Image: Shutterstock) The US-based consumer goods giant Procter & Gamble Co (P&G) has recalled certain aerosol deodorants and sprays of its two brands – Old Spice ... Read more »

Look for leaders with humility and flexibility: Nisaba Godrej

Nisaba Godrej, Executive Chairperson, Godrej Consumer Products Ltd. Organisations may look for leaders who have empathy, humility and flexibility, and they should be comfortable with the digital world, said Nisaba ... Read more »

This is how the Netherlands reacts to a new blow in crisis: ‘This is a 100 percent lockdown for us' Economy

reactionsEvening life is completely restricted in the Netherlands. Almost all businesses will have to close their doors from 5 p.m. in the near future. Primary and secondary schools will remain ... Read more »

‘I'm really not going to order game for Christmas'

Is it still fun to be a catering entrepreneur? Karin van Asperen, owner of cafe ‘t Heertje in Weesp, is no longer enthusiastic. “My motivation has really gone to zero. ... Read more »

OPEC+ reportedly no longer wants to expand oil production

The countries of the oil cartel OPEC and allies such as Russia are thinking of canceling the planned easing of oil production for January. That writes Bloomberg news agency on ... Read more »

‘With a hundred million you can also feel poor'

The least worn item of clothing by the ultra-rich? winter coats. Sure, they’ll probably have a lot of them in their closet – for hunting, winter sports, the few yards ... Read more »

Old Spice, Secret deodorant sprays recalled over cancer-causing chemical

Proctor & Gamble recalled a host of Old Spice and Secret deodorants due to a chemical that could cause cancer. Proctor & Gamble said it is voluntarily recalling certain Old ... Read more »

Peloton sues Lululemon in battle over bras and leggings

Peloton took preemptive action against Lululemon after the women’s sports apparel company threatened to sue Peloton over its launch of a clothing line. Getty Images Peloton has sued Lululemon after ... Read more »

Canada releases 50 million pounds from maple syrup reserve amid global shortage

The Quebec Maple Syrup Producers are releasing 50 million pounds of maple syrup from its strategic reserves. Universal Images Group via Getty The Biden administration is trying to reign in ... Read more »

Stocks making the biggest moves midday: Moderna, United Airlines, Zoom and more

Moderna's sign is seen outside of their headquarters in Cambridge, MA on March 11, 2021.Boston Globe | Getty Images Check out the companies making headlines in midday trading Friday: United ... Read more »

49% of consumers plan to shop Small Business Saturday. These tips can help

A sign reading “Shop Local” with closed restaurants and shops on Main Street on April 10, 2020 in Livingston, Montana.William Campbell | Getty Images While Black Friday may be the ... Read more »

Russia sends drug substance for production of coronavirus vaccine to Kazakhstan — senator

The Speaker of the Federation Council drew attention to constant contacts at the highest level, as well as an active dialogue between parliamentarians Read more »

Georgia outlines plans to improve slow pace of rental help

ATLANTA — Georgia officials struggling to distribute federal funds to prevent evictions have outlined plans to increase the speed at which they get the money to landlords and renters. The ... Read more »

Etsy sellers and other small businesses are betting on local sourcing to win the holiday

Darin Mays makes wood tables and sells on Etsy. He sources locally and can quickly navigate supply headaches plaguing other retailers.Larry Falk | CNBC This holiday season, Darin Mays isn't ... Read more »

Peloton has sued Lululemon in feud over cycle maker's new apparel line

Cari Gundee rides her Peloton exercise bike at her home on April 06, 2020 in San Anselmo, California.Ezra Shaw | Getty Images Peloton has sued Lululemon after the leggings maker ... Read more »

Vaccine makers move quickly against new omicron Covid variant, testing already under way

A vial of Pfizer-BioNTech Covid-19 vaccine.Getty Images The world's major manufacturers of Covid-19 vaccines said Friday that they are working to quickly investigate and adapt their shots to a new ... Read more »

KLM will continue to fly to South Africa, says passengers must comply with rules

Photo: Depositphotos.com Dutch flag carrier KLM said on Friday afternoon it will continue to fly between the Netherlands and South Africa, despite the so-called ban on flights imposed by the ... Read more »

Singha upbeat on outlook for hotels Developer banking on tourism revival in Thailand, Mauritius and Fiji

Outrigger Mauritius Beach Resort, a 181-room resort, saw its occupancy rate reach 40% in the first month it reopened. SET-listed developer Singha Estate expects the tourism sector in Thailand, Mauritius ... Read more »

IEAT mulls new Songkhla power plant

From left are Mr Komgrit, Mr Veeris and Mrs Rosaya at the signing. The Industrial Estate Authority of Thailand (IEAT) plans to conduct a joint study on a gas and ... Read more »

Global economy 2022: the year of normalisation

As we head into the final stretch of the year, our eyes are on next year's economic and investment landscape. If we compare current conditions with those of this time ... Read more »

Survey: 40% of SMEs face high risk of closure

As many as 40% of small and medium-sized enterprises (SMEs) face a high risk of closure because of tight liquidity and higher operation costs, according to the latest study by ... Read more »

Excise tax on salty foods proposed

A shopper purchases instant noodles at a supermarket. The government is inching towards the introduction of an excise tax on salty, processed foods, says Finance Minister Arkhom Termpittayapaisith. While declining ... Read more »

Markets plunge on new variant fears Prayut bans travel from Africa as strain spooks investors

Mr Nuttachart said global stock markets, including Thailand, fell more than 1% on concerns over the new strain, which is suspected to be able to evade vaccine immunity. Thai and ... Read more »

EEC touts prudence of PPP projects

Four key infrastructure projects in the flagship Eastern Economic Corridor (EEC) are saving the state significant amounts of money because of their public-private partnership (PPP) funding, in addition to offering ... Read more »
On free-english-test.com you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic