Mitch's Mailbox

June 17th, 2022

Making Sense of Inflation and Market Volatility

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James H. from Portland, ME asks: Hi Mitch, I’m sure I’m like a lot of your other readers expressing concern about spiraling inflation and the market’s pretty relentless selloff. What comments do you have about the latest inflation reading and the accompanying downdraft?

Mitch’s Response:

Thanks for writing! I understand how unpleasant it is to experience such pronounced selling pressure in the stock market, while also watching negative headline after negative headline appear on the news. It often feels like a perfect storm when both are happening at the same time.

The latest inflation data caused a stir last week – the Labor Department reported that the consumer price index (CPI) rose 8.6% year-over-year in May, its fastest rate of increase since December 1981. A lion’s share of the price increases came predictably from energy, which saw prices rise 34.6% from a year earlier. Monitoring the changes in gas prices over the course of May made this element of inflation very visible.

4 Ways to Protect Your Retirement from Rising Inflation

Inflation is hard for everyone, but it can be particularly stressful for people in retirement.

Rising inflation can be very costly for the economy, but what can investors, especially those nearing retirement, do to keep their investments afloat?

Now, instead of panicking, I recommend that you take a look at steps that could help reduce the sting of inflation. To help, we’re offering our exclusive guide, 4 Ways to Protect Your Retirement from Rising Inflation2. You will get insight on:

If you have $500,000 or more to invest, get our free guide today! Download 4 Ways to Protect Your Retirement from Rising Inflation2.

Grocery prices also saw their biggest increase since 1979, as exports have been disrupted due to the war and other supply chain issues still related to the pandemic. The impact of drought and disease on certain crops and meats has also factored into higher prices. Elsewhere, airfares were up 12.6% for the month as the cost of jet fuel continues to rise, hotel prices surged 19.3%, and restaurant prices were up 7.4%.

When this type of data is accompanied by sharp selling pressure in the stock market, it can easily feel like everything is in a tailspin. And since folks interact daily with higher food and energy prices, it is also very easy to leap into thinking the broad economy is in freefall.  

But as it stands today, the economy is not in freefall, and inflation is only one data point of many that matter to the U.S. and the world’s growth trajectory. I would also argue that the selling pressure in the stock market is less related to inflation figures – which are already widely known and priced into the market – and more related to sentiment-driven forces.

A recent poll found that 83% of people think the U.S. economy is in a poor or ‘not so good’ state, and 35% of respondents reported being unhappy with their financial situation. These figures mean that people are more unhappy today than they were in the midst and aftermath of the 2008 Global Financial Crisis, when the jobless rate was double-digits, major financial institutions were declaring bankruptcy, and millions of people were losing their homes and livelihoods. Is the economy worse today than it was then?

History tells us over and over that the more negative investor psychology becomes, the greater the opportunity for strong returns on a forward-looking basis. This principle is especially true, in my view, when the economic narrative is fixated on an issue that is widely known – in this case, inflation – even as jobs remain plentiful, and consumers continue to spend ‘behind the scenes.’ I understand that market volatility is challenging, unpleasant, and can easily elicit doubt even among the most experienced investors. But now is a time to stay cool.  

Inflation may be rising, but there are steps you can take to prevent it from affecting your long-term investments! Even during difficult times when emotions are running high, I recommend taking steps that could help reduce the sting of inflation. To help, I am offering our exclusive guide, 4 Ways to Protect Your Retirement from Rising Inflation3. You will get insight on:

If you have $500,000 or more to invest, get our free guide today!

Disclosure

1 Wall Street Journal. June 10, 2022. https://www.wsj.com/articles/us-inflation-consumer-price-index-may-2022-11654810079

2 Zacks Investment Management reserves the right to amend the terms or rescind the free 4 Ways to Protect Your Retirement from Rising Inflation offer at any time and for any reason at its discretion.


3 Zacks Investment Management reserves the right to amend the terms or rescind the free 4 Ways to Protect Your Retirement from Rising Inflation offer at any time and for any reason at its discretion.


DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

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