ST. LOUIS — Many economists use “core inflation” as the best method to measure changes in prices because it excludes the more volatile changes in food and energy prices.
Core inflation in September saw its biggest increase since 1982, jumping 6.6% from the same month a year earlier. In August, the percentage increase was 6.2%.
How do you invest during a period of high inflation? It’s a challenging question without easy answers. Four St. Louis area investment strategists offered their perspectives to the Business Journal.
JARED KIZER | chief investment officer | Clayton-based Buckingham Wealth Partners
Jared Kizer has studied what happens during the transition periods from low to high inflation.
“Generally, the things that tend to do relatively well in that period is a super-short list, with shorter-term inflation protected securities toward the top of the list. Commodities tend to do well, but the stock market and longer-term fixed income, just as we saw this year, tends to get hit badly,” he said.
The question is whether that transition from low to high inflation is ending. The financial markets have sent signals that it is, Kizer said, but that could change as more inflation data is released.
If the markets are right that inflation will moderate significantly from this year, that could be a silver lining for fixed-income investors, he said. The Federal Reserve aims for 2% inflation over the longer run. But if it only drops to 4% and camps there, that would be tough for shoppers, but possibly a “silver lining” for investors, Kizer said.
“Finally, fixed-income investors are seeing some light at the end of the tunnel where you at least have some hope that you will be earning interest rates above what inflation is going to be," he said.
Dividend stocks are viewed as a hedge against inflation and also a buffer during market volatility. In the second quarter of this year, dividend payouts in the S&P 500 set a record despite rising interest rates, inflation and an economic slowdown, The Wall Street Journal reported.
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