COVID-19 has been in the United States for two years, but are we back to pre-pandemic levels? It doesn’t appear to be the case.
While volatile, the stock market rebounded well from the first shock and continued to perform well throughout the duration of the epidemic, until recently. Inflation, which has been climbing to levels not seen in years in recent months, looks to be one of the contributing factors.
Why this is happening is a hot topic of discussion. Given persistent challenges with supply chains, inventory shortages, the labor market, and rising pay demands, several analysts believe the inflation is pandemic-related. 1 Others have noted that prices are being intentionally pushed up to take advantage of the pandemic pretext for inflation, based on CEO remarks on conference calls and recent financial filings. 2
Both of these tendencies may, in fact, be leading to rising pricing. Companies may be boosting prices today, but when the Federal Reserve raises interest rates and spending slows, revenues will likely plateau. In truth, Americans are paying more for a wide range of consumer products, both essential and discretionary. 3 One way to look at it as an investor is that while you may spend more at the grocery store and petrol station, you may possibly make more in your portfolio by investing in the same firms that have hiked prices. 4 Please contact us if you’d like a professional evaluation of your existing holdings and asset allocation.
Unfortunately, stock prices in February failed to stay up with recent year-end performance levels. Paying rising fees while seeing your portfolio balance plummet is a difficult pill to take. The most essential things to keep in mind are how you spend your money and what you hope to achieve with your portfolio in the long run. To that purpose, you should concentrate on two crucial habits:
1 – Never be a squanderer. Pay a fair price for the items you desire. Consider switching brands or, if feasible, removing them entirely if they are exorbitant for the value they deliver. Certain items, like as vehicles and houses, may not provide a satisfactory return on your investment if you overpay right now.
2 – Concentrate on your investing objectives. Don’t get too caught up in day-to-day market changes if you’re investing for a retirement that’s five years or more away. Make sure your portfolio has a smart asset allocation that will help you achieve your goals both before and after you retire. Keep an eye on your timeframe and make allocation modifications as needed if you’re saving for education, a house, or another short-term objective.
A daily fixation with stock prices, on the other hand, is counterproductive. Focus on your monthly grocery bill or electricity costs instead. Consider how you might cut such costs in the long run.
Trust in America’s capitalism ideals and the long-term performance of the investing markets are other important factors. They increase and fall, giving consumers, workers, and investors the opportunity to profit when prices are low and benefit when prices are high. 5
Even though it doesn’t feel like it at times, these highs and lows are part of our daily lives, pandemic or not.
Content prepared by Kara Stefan Communications.
1 Alvin Powell. Harvard Gazette. Feb. 4, 2022. “Summers says pandemic only partly to blame for record inflation.” https://news.harvard.edu. Accessed Feb. 21, 2022.
2 Megan Leonhardt. Fortune. Feb. 19, 2022. “Is inflation really this bad, or are greedy companies profiting off the pandemic?” https://fortune.com. Accessed Feb. 21, 2022.
3 Lisa Shalett. Morgan Stanley. Feb. 7, 2022. “Why the market’s rebound may be short-lived.” https://www.morganstanley.com. Accessed Feb. 21, 2022.
4 Kristina Zucchi. Investopedia. Feb. 10, 2022. “Inflation’s Impact on Stock Returns.” https://www.investopedia.com. Accessed Feb. 21, 2022.
5 John Harwood. CNN. Feb. 13, 2022. “Most Americans have come out ahead economically in the pandemic, despite inflation.” https://www.cnn.com. Accessed Feb. 21, 2022.