The current market environment is a challenge. With the Consumer Price Index registering increasingly higher values, supply-chain challenges mounting, and fiscal and monetary stimulus continuing unabated, it s reasonable for vigilant investors to wonder what will come next. It behooves those with a long investment horizon to curate portfolios that can withstand periods of inflationary pressures while remaining mindful that additions to a portfolio should improve its overall risk/return profile. What are the options?
Commodities, Treasury Inflation-Protected Securities, and equities like REITs or energy producers may provide some benefit against inflation, and in the past we ve explored how those assets have improved investors portfolios. However, it can be a challenge to select a single inflation-sensitive exposure from myriad menu options, let alone to conduct the due diligence needed to formulate a complementary combination of them.
The Commodity Markets Outlook in eight charts
1. Almost all commodity prices are higher than before the pandemic
2. Crude oil prices recovered in record time
Oil price collapses and recoveries
3. Spare oil production capacity is vast
While production cuts by OPEC and its partners (OPEC+) have been critical in supporting oil prices, the resulting large quantity of spare production capacity will limit price increases over the forecast horizon. In addition, if pandemic containment falters, a further weakening in demand could put pressure on the production cut agreement. A breakup of the agreement could result in markedly lower oil prices.
4. Natural gas and coal prices also rallied
Retirees Can Preserve Buying Power Despite Higher Inflation
Daily Reflector, The (Greenville, NC)
In light of all stimulus packages being pumped into the U.S. economy in response to the shock from COVID-19, some investors are becoming nervous about inflationary pressures.
As a result, inflation has been thrust to the forefront of the economic discussion in recent weeks. For the most part, economists define inflation as a rise in the general level of prices over a specified period and typically use the Consumer Price Index for All Urban Consumers (CPI-U) as a point of reference for tracking the inflation rate.
When It Comes to Beating Inflation, Retirees Have Options April 15, 2021
Inflation is one of the biggest issues retirees face. Due to low interest rates, it’s getting harder for retirees to replace income from their jobs, and due to inflation, their real spending power can be diminished.
In bygone eras of retirement and retirement planning, there were some hard and fast rules, including the 4% spending rule. However, that’s a blanket approach for a topic where one-size-fits-all doesn’t always fit all.
It’s often said that many retirees are overly frugal, particularly early in retirement. That approach isn’t uncommon because while no one knows exactly what their lifespan will be, they do know what their financial resources currently look like.