Enormous surges in prices from the gas pump to the grocery store have continued to cause pain in all our collective wallets. In fact, the June 2022 inflation rate was 9.1% – the highest number in over 40 years.
This increase has raised multiple questions:
- What is the cause of such a rise in inflation?
- What does this mean for investments and retirement accounts?
- What do I need to do right now?
In this post, we’ll investigate some of the root issues pushing inflation up. And we will help you understand how to weather the storm and come out okay on the other side.
Economic Factors Driving Inflation
In its simplest format, inflation stems from three primary economic factors:
1. High Consumer Demand
Consumer demand for goods rose in line with the pandemic. Some government support helped boost many Americans’ bank accounts. This, in turn, provided more disposable income for buying goods.
Increased funds for many have pushed demand up. And that demand has remained high ever since.
2. Decreased Supply and Supply Chain Issues
Alongside high demand, lower supply caused a sharp rise in many consumer goods and services. Meanwhile, the pandemic has caused ongoing factory shutdowns, labor shortages, and limited staffing in some cases.
All of this contributed to a ripple effect within parts shortages, product assembly shortages, and other supply chain hiccups. Consequently, consumers have literally paid the price with spikes in costs across the board.
3. Greater Pressure in the Service Sector
Beyond goods, consumers have also been spending on various services and experiences. As the world attempts to return to normalcy, new demands have been placed on service workers. But other effects of inflation such as rental spikes and fuel costs strain the already stretched industry.
The consequence here, like in other economic areas, is a rise in costs for all of these service and experience areas.
Inflation and Your Investments
For those of you concerned about your investments, there is some good cause for it. Inflation’s effects have a direct impact on many stock market factors:
- Reaction to decreased consumer spending
- Anticipation about the Federal Reserve and interest rates
- Worries of a recession
- Decreased demand for higher-risk opportunities
But this stock-market-focused perspective does not represent the full range of investments. This is why it is critical to get expert advice on your next steps.
What to Do Right Now
Despite these investment fears, the advisors at Delta Capital Management recommend taking a moment before hyper-reacting to any perceived risks.
In many cases, stocks recover and thrive after an inflation peak. With many government interventions on the way to slow inflation, this could be the exact scenario playing out.
The best course of action is to work with a Delta Capital advisor on your specific portfolio. They can analyze where you are relative to the state of the stock market, inflation, and other factors. They can help you make adjustments as needed to keep moving toward your financial goals.
In times of worry and concern, it’s good to have an expert on your side. Speak with the team at Delta Capital to learn more about how they can help you stay on track toward a secure future.