Each year, the world in which we live becomes more expensive. That’s simply the nature of inflation—and in many experts’ opinions, inflation is a necessary part of an expanding economy. But just how fast inflation moves is something that our central bank, the Federal Reserve, continues to try and get under wraps. And in August 2023, it seems that consumers were once again facing higher prices, especially at the gas pump.
But every potential complication can be an opportunity in disguise, and this latest increase in inflation is no different.
According to the Labor Department, inflation increased 3.7% year-over-year in August 2023.
This reading is based on the Consumer Price Index (CPI), which tracks prices for everyday goods like groceries, gasoline, and rent. According to the Labor Department, the CPI rose faster in August than it did the previous month, and it rose above previous estimates from Refinitiv economists.
In an article published by Fox Business on September 13, 2023, Navy Federal Credit Union corporate economist Robert Frick is quoted as saying, “This was bad news for Americans who feel inflation most acutely when filling their tanks and writing their rent checks. Some rent relief is in sight, but it won’t occur until next year, and it will be a small comfort given how high shelter costs have risen.”
One major contributing factor was the increase in gas prices, which jumped 10.6% from July 2023 to August 2023 according to Labor Department data.
It seems that while the inflation rate broadly has come down, it may still have a while to go before it reaches the Federal Reserve’s 2% goal.
As a result of higher inflation, U.S. household incomes are falling.
On September 12, 2023, the U.S. Census Bureau released its annual report on the previous year’s American household income. According to the report, “Real median household income after taxes fell 8.8% to $64,240 from 2021 to 2022, and the poverty rate after taxes as measured by the Supplemental Poverty Measure (SPM) increased 59% to 12.4%.”
According to a September 12, 2023, article by Bloomberg, this marked the third year in a row that the median income fell, as well as the largest drop in inflation-adjusted household income since 2010. The article remarks that three consecutive years of annual declines “has been a feature of past recessions like the global financial crisis, the dotcom bubble, and the downturn in the early 1990s.”
Notably, the Bloomberg article also states that in 2022, “Families faced the largest annual increase in the cost-of-living adjustment in over four decades.”
So when it comes to the question of how a return to increased inflation might impact your portfolio, the answer seems to be just what you’d expect: Higher prices means taking home less money. Less money means less you can comfortably put into retirement, less you can spend on your next vacation, and perhaps most importantly for us family-minded individuals, less money to help secure and protect the futures of our children and grandchildren.
Higher inflation means something else, too. Even as those trips to the gas pump are costing you more and more each year, the dollars you’re not using are also losing their purchasing power. This may be why so many Americans have been calling us, looking for a different path to help secure their wealth.
Physical gold has stood the test of time as a store of wealth with impressive long-term growth.
Inflation may be a necessary part of a healthy economy, but that doesn’t mean we have to feel all of its effects on our portfolios. With what we have learned, we now understand the importance of looking for opportunities that may help shield the purchasing power of our hard-earned money.
On such opportunity is physical gold. Over the long term, gold has seen impressive growth, increasing by more than 640% between April 2001 and August 2023. This is one reason why so many people—not just in the United States but around the world—see physical gold as a store of wealth that can stand the test of time and help protect what matters most—our future and the futures of our loved ones.
Just as each one of our financial situations and goals are unique, the amount of gold or other physical precious metals we would need to find the right balance between protection and growth potential may also be unique. So give us a call—we’re happy to discuss your diversification goals with you and find a unique solution that may help shield your wealth from some of the long-lasting impacts of rising inflation.