Fresno Financial Consultant News: What Might Be Next — Inflation or Deflation?

Consumer prices fell by 0.8% on a seasonally adjusted basis in April, the biggest drop in more than a dozen years, the Bureau of Labor Statistics reported. Conversely, prices for grocery items jumped 2.6%, the highest one-month increase in 46 years, with eggs rising by 16%.1

What’s going on here? Well, the devil is in the details, an important lesson to learn about interpreting data. It’s true that supermarket prices are rising, mainly because of two factors: The coronavirus pandemic has disrupted supply lines, and more Americans are eating at home and buying more groceries. Together, these factors have contributed to the tight food supply, and per the economic theory of supply and demand, when supply is low and demand is high, prices rise.2

As for the drop in consumer prices, that’s the other side of the coin. With the nationwide efforts to close businesses and shelter in place, people are simply buying less. They may be out of a job or worrying about that prospect, so they’ve been hanging onto every last dollar — buying only the necessities.

The thing about falling demand is that it requires retailers and manufacturers to drop prices to entice sales. If they can’t sell what they are producing, then they cut back production, and people lose jobs. It’s a vicious circle, and one that can lead to deflation.3

Let’s face it, both inflation and deflation can have negative effects on investment portfolios, so it’s important to take steps to help protect against those risks.4 We have strategies that can help mitigate the effects of volatility on your retirement plan. Give us a call, and we’ll help tailor a plan for your personal circumstances.

Inflation usually gets top billing when discussing the economy because rising prices over the long term cut down on how much a dollar can buy. However, a little inflation, around 2% to 3%, isn’t a bad thing. It’s usually an indicator that people have jobs, spending demand is high and companies can afford to raise prices. Deflation, in contrast, can be more concerning, as it can lead to an economic recession or depression.5

The Federal Reserve, as part of its efforts to shore up the economy during the pandemic, appears just as intent on mitigating deflation as it is inflation. In early May, Fed Chair Jerome Powell said, “As long as inflation expectations remain anchored, then we shouldn’t see deflation. Needless to say, we’ll be keeping very close track of that.”6

Fresno Financial Consultant Takeaways 

As your Fresno retirement plan consultant we felt the following ideas were top notch: Consumer prices fell by 0.8% on a seasonally adjusted basis in April, the biggest drop in more than a dozen years, the Bureau of Labor Statistics reported. Conversely, prices for grocery items jumped 2.6%, the highest one-month increase in 46 years, with eggs rising by 16%.1 It’s true that supermarket prices are rising, mainly because of two factors: The coronavirus pandemic has disrupted supply lines, and more Americans are eating at home and buying more groceries. The Federal Reserve, as part of its efforts to shore up the economy during the pandemic, appears just as intent on mitigating deflation as it is inflation. In early May, Fed Chair Jerome Powell said, “As long as inflation expectations remain anchored, then we shouldn’t see deflation.”

Diversifying your retirement assets among a variety of vehicles and alternatives—both insurance and investment oriented, depending on what is appropriate for your situation—may offer you a better chance of meeting your retirement income goals throughout your lifespan. We help our clients with the following…Medicare long term care and risk management strategies that can help you accomplish those goals. 

Soutas Financial & Insurance Solutions Inc. your Fresno financial planning consultant is committed to helping take the complexity out of retirement planning. By using a variety of insurance and investment products such as trusts, probates, charitable giving, estate planning, or tax-efficient strategies, we can help you develop an overall retirement income strategy specific to you and your family. We have a strong team of professionals helping ensure you receive all the assistance you need not only in developing your retirement income strategy, but in maintaining it throughout your retirement. Contact us today at 559-230-1648 or visit us today at Soutas Financial to get your retirement plans on track for success! 

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333 W. Shaw Avenue Suite 106
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(559) 230-1648 
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Content prepared by Kara Stefan Communications. 

1 Anneken Tappe. CNN Business. May 12, 2020. “Prices are tumbling at an alarming rate.” https://www.cnn.com/2020/05/12/economy/consumer-prices-april/index.html. Accessed May 21, 2020.

2 David Goldman. CNN Business. May 14, 2020. “Grocery prices are soaring. Here’s what’s getting more expensive.” https://www.cnn.com/2020/05/13/business/grocery-prices/index.html#:~:text=That%20was%20the%20biggest%20increase,demand%20for%20groceries%20shot%20up%20. Accessed June 5, 2020.

3 Anneken Tappe. CNN Business. May 12, 2020. “Prices are tumbling at an alarming rate.” https://www.cnn.com/2020/05/12/economy/consumer-prices-april/index.html. Accessed May 21, 2020.

4 Paulina Likos. U.S. News & World Report. May 14, 2020. “How Inflation and Deflation Impact Your Investments.” https://money.usnews.com/investing/investing-101/articles/how-inflation-and-deflation-impact-your-investments. Accessed May 21, 2020.

5 Troy Segal. Investopedia. March 25, 2020. “Inflation vs. Deflation: What’s the Difference?” https://www.investopedia.com/ask/answers/111414/what-difference-between-inflation-and-deflation.asp. Accessed May 21, 2020.

6 Paul Davidson. USA Today. May 3, 2020. “Besides millions of layoffs and plunging GDP, here’s another worry for economy: Falling prices.” https://www.usatoday.com/story/money/2020/05/03/coronavirus-us-deflation-falling-prices-new-economic-risk/3070084001/. Accessed June 5, 2020.

Our firm is not affiliated with the U.S. government or any governmental agency. 
 
We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Soutas Financial & Insurance Solutions, Inc are not affiliated companies. California Insurance License # OK48173 
 
The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. Investing involves risk, including possible loss of principal. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company.  Diversification cannot ensure a profit or guarantee against losses in a declining market. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference. 659682 – 6/20