The rate of inflation is now the highest it has been in more than 30 years. Prices are going up because demand is exceeding supply. As we know, the cure for high prices is high prices, as buyers of products and services will buy less or seek alternatives to save money. Generally, the best solution is to let the marketplace take care of itself with limited intervention.
If the Federal Reserve determines that it needs to slow the economy to arrest inflation, however, the rate of earnings growth for companies will likely drop. Consequently, the price of stocks might also drop. The economy, stock earnings, and stock prices are all correlated.
When it comes to your investments during this time, there are several things you should keep in mind:
- Keep an eye on local services and goods.
- The ‘wealth effect’ induces spending.
- Remember, investments are for the long-term.
- It’s critical to own assets.
In my latest article for Forbes, I take a closer look at all four of these topics and how they might impact your investments. Click here to read the full article.