Own Assets that Outpace Inflation
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In this episode of Market Perspective, we are going to explore recent developments in the financial world and what they could mean for you. Specifically, we’ll discuss how recent trends in inflation, mortgage rates, and the stock market are shaping the economic landscape—and why owning assets that outpace inflation is crucial for preserving your purchasing power over time.
First up, let’s talk about inflation. The latest report shows that inflation has cooled to 2.89% year-over-year. This rate is significantly lower than the peak of 9% we saw in 2022. While inflation has certainly come down, it’s important to remember that prices are still rising—just at a slower pace.
Here’s the thing: when we talk about inflation, it’s not just about the rate of change. The overall cost of goods and services is still increasing, which means your dollar doesn’t stretch as far as it used to. This is where the concept of owning assets that outpace inflation comes into play.
Now, let’s pivot to the housing market. Mortgage interest rates have fallen to a 15-month low of around 6.5%, which is encouraging news for those looking to buy a home. Lower rates can mean lower monthly payments, potentially making homeownership more accessible. However, there’s a catch—home affordability remains a challenge. Despite the drop in interest rates, home prices are still relatively high, making it difficult for many to enter the market.
Finally, let’s discuss the stock market. In July and August, the U.S. stock market experienced a decline of about 8.5%, only to recover to near all-time highs. This volatility can be unsettling, but it’s a natural part of the market cycle.
A key tenet here is to plan for uncertainty to avoid becoming a forced seller in a down market. It’s about having the discipline to hold onto your long-term investments during periods of short-term volatility.
The takeaway: Inflation may be cooling, but it’s not gone. Mortgage rates may be dropping, but affordability is still a challenge. And while the stock market can be volatile, we believe it will grow and outpace inflation over the long term. *1
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Please note that investments, like those in the stock market, involve risk, may lose value, and are not guaranteed.
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These discussions aim to spark dialogue about enhancing retirement readiness and making more informed financial decisions. At Vector, we delve into the nuances of scenario planning, offer insights and guidance tailored to each client's unique circumstances. If you or someone you know is pondering their financial future or seeking clarity on their retirement plan, we're here to help.
This discussion is with Vector’s Jason Ranallo
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