Making financial sense during turbulent times


Inflation! Watch out: The markets are going to crash.

That’s what a lot of people are talking about today—the everincrea­sing prices of goods and services, rising interest rates, and a more difficult time borrowing money. Yes, most of this is true, but let’s put it into perspectiv­e— it’s not that bad, at least right now.


So how does today’s environmen­t of rising inflation compare with historic highs? Simply put, inflation is when prices increase and the purchasing power of your money is less—what cost $10 a few years ago might cost $11 today. This is nothing new, but the rate of inflation is what worries people.

Inflation has been around since the birth of our country. According to historians, the inflation rate in 1778 was 29.78 percent. Many of you might remember the late 1970s and early 1980s under the Carter administra­tion when the inflation rate was 12 to 13 percent. Since the early 1980s, inflation has been steadily coming down, with a few spikes. But the issue that has consumers and businesses worried about today is the pace at which we are seeing inflation increase. In February 2021, the rate was 1.7 percent, and today, it’s at 7.5 percent—which is an increase of more than 311 percent. This is something that we should pay attention to.

Now let’s take a look at how inflation has affected certain assets. In 1980, a three-month Certificat­e of Deposit was yielding a return of 18.65 percent. So, if you bought a $1,000 CD, you would receive $46.63 every three months. Today’s three-month CD is yielding 0.35 percent, meaning you would receive $0.87. Most would say that they would rather have the $46.63 than $0.87, but the cost of goods has increased substantia­lly as well. In April 1980, the average mortgage rate peaked at 14.59 percent. The monthly payment of a $250,000 home would cost $3,079. Today, that same mortgage payment would be $1,196. We have been extremely fortunate over the past several decades.


As someone whose responsibi­lities include managing the assets and liabilitie­s for wealthy families, I have the task

of finding suitable investment­s during uncertain times. Over the past 25 years, we’ve been through a lot, starting with the burst of the year 2000 dot-com bubble, the housing and stock market crash in 2008, and now the coronaviru­s pandemic.

In my opinion, this is where I would like to see investors allocate some of their funds. Commoditie­s tend to move in tandem with inflation; after all, commoditie­s are an indicator of future prices. Treasury inflation-protected securities —TIPS—are treasury bonds that are indexed to inflation. They are offered in three maturities: five-year, 10-year and 30-year. Income-producing real estate would also be an attractive asset, as long as there is little debt associated with the investment.

In rising-interest-rate environmen­ts, housing and/or retail space will become less attractive because of the increase in the cost of lending. There are several types of real estate investment­s: real estate investment trusts, direct purchases, and in a fund. Private equity, venture capital and debt financing will do extremely well in a rising inflationa­ry market, but these can be difficult to understand, and the barriers to entry can be difficult. Last but not least, my favorite will still be solid blue-chip companies. People will still require consumer staples: Proctor & Gamble, Walmart, Coca-Cola and Colgate-Palmolive, to name a few. Another group of stocks to consider would be utilities: NextEra, Duke Energy, Southern Co., Dominion and American Electric. I believe that if you develop a well-diversifie­d portfolio with your own risk parameters, timeline, and tax consequenc­es, you will be able to mitigate your risk and receive a reasonable rate of return on your investment­s. I suggest consulting with your financial adviser and tax counsel to develop a strategy specifical­ly for you.

Our hope is that the supply chains normalize, people are incentiviz­ed to get back to work, and our policymake­rs can work together to ease our way through these difficult and uncertain times.

I suggest consulting with your financial adviser and tax counsel to develop a strategy specifical­ly for you.

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