Inflation measured nationally is a little higher than the long term expectation of 3%. It’s almost always present and it is normal for it to rise and lower over time. Interest rate hikes are being implemented starting March 16, 2022, as a normal process to dampen inflation.
Check out these examples of saving $5000 and growing it in the market over 45, 35 or 25 years. The difference is astounding! Yet, this is the basic math of growing wealth over time in the market. “Simple, inevitable wealth”
Reaching a new high doesn’t mean the market will retreat. Stocks are priced to deliver a positive expected return for investors, so reaching record highs regularly is the outcome one would expect.
Global markets, in the last 12 months, performed strongly with our model portfolios made up of 40%-100% global stock up from 13% to 34% and a slight cooling in Q3.
The past three decades have been a period of relatively moderate inflation in the United States with the annual increase in the consumer price index averaging around 2.3%. Yet the impact of even this amount of inflation has been to reduce the purchasing power of an uninvested dollar by around half.
A look at headlines from the past 50 years shows the difficulty of timing markets around inflation expectations. Investors may be better served sticking to a long-term plan.
