Money magazine: “Inflation Explained — Should You Worry About Rising Prices Post-Pandemic?”
April 9, 2021, Money magazine — In today’s issue of Money magazine, reporter Julia Glum writes: “Imagine if a helicopter suddenly dropped $5,000 on every person in the country. Lots of people would want to use the cash to buy stuff, right? But there wouldn’t automatically be more stuff available for them to buy. As demand outpaced supply, prices would rise.
“It’s an oversimplification that, in a nutshell, describes what some experts are worried could happen in the post-pandemic economy. They join a growing chorus of voices raising concerns about inflation, leading to alarming headlines and quotes about how “investors should be prepared for the biggest inflation scare in America” since the 1980s.
“But how worried should you, a non-expert, be? Here’s everything you need to know about inflation.”
Julia turned for Marguerita Cheng, CFP® Pro for insights on: How to prepare for inflation (just in case)From a savings point of view, Blue Ocean Global Wealth CEO Marguerita Cheng says she understands why people may be anxious about the possibility of inflation. Because the Fed has kept interest rates low, “if you’re trying to be a saver, you’re not too happy,” she adds.
Cheng, also a CFP Board ambassador, says you should still have a relatively liquid emergency fund you can access in the short term. For the long term, stocks are a good hedge against inflation, especially for young people with decades to go before retirement. “Over time, the growth rate does outpace inflation,” she says.
Bottom line? People are buzzing about inflation because the economy is opening back up, and there’s some concern that pent-up demand could increase prices. (There’s also some meta concern that the expectation of inflation could actually cause inflation, but that’s another story.)
While you may want to mentally prepare for the possibility of inflation and consider having a conversation with a financial advisor about how to adjust your portfolio, there’s no need to panic. “The sky is not falling.”