Investment Planning: Inflation

Tyler Braun, Senior Financial Advisor, talks about supply and demand and why inflation can be good for the economy.

Hearing about interest rates and inflation.   and most of my clients are asking why it is   up or what is inflation. inflation is simply the  cost of goods and services increasing from where   they were before. normal inflation is actually  good for the economy. if you think about it,   inflation is driven by supply and demand

And the  federal reserve is targeting about a two percent   inflationary rate which means that the supply  chain can just keep up with the demand for that   product. hyperinflation or very high inflation  can be a lag on the economy and it’s something   that we need to pay attention to. ultimately with  hyperinflation, let’s

Just use 10 percent as an   example, if inflation is up by 10 percent that  means you’re able to purchase 10 percent less,   with the same amount of money as you were a year  prior, right. think about that, the economy is   driven by consumer spending and if you are able  to buy less product that starts to put a damper  

On future growth. two key factors are being driven  by this. you think about the pandemic and what we   faced over the last 18 months. we have put a lot  of stimulus and money into the economy and into   on mortgages, forbearance on student loans,   a moratorium on eviction, stimulus checks that  were sent out to individuals

And then the child   tax credit of $300 per child, per month to certain  families. families received extra money and a lot   of people spent it, which drove up demand and  desire to buy product. at the same time, we   have had the largest clog in supply chain in the  history of the united states, with the pandemic.   we

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Cannot even get the product off the ships fast  enough to distribute it to satisfy the demand to   buy the product right now. so, anytime you have  a high desire to spend and a low inventory, the   remaining product has to go up in cost, right. so,  when we look at that, we know inflation is bad,   when it is in that hyperinflation

Mode. the way  that the federal reserve has to offset inflation   is by increasing interest rates. so, you hear  that, you say why does increasing interest   rates have an impact on inflation? that’s a great  question. so, let’s break it down a few different   ways, right. when we look at interest rates going  up put yourself

In the average american shoes.   looking to purchase a home, looking to purchase  a car. if interest rates are higher meaning that   to financial institutions, paying more to banks   you have less cash flow to buy other products.  so, what happens is your demand or desire to   buy those products comes down and it allows

The  inventory to start catching back up, right? which   ultimately if you have an oversupply of inventory  that inflation or product cost can come down. that   is a normal economy, okay? the issue is right now  is not normal we’re in the midst of a pandemic and   what we have to pay attention to is just because  interest

Rates are going up in the short term   it will not solve the logistical issues due to  covid of bringing the inventory here faster. so we   do anticipate interest rates going up in the short  term, right? it could be three rate increases,   it could be five rate increases etc. but we are  still anticipating inflation to remain

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Fairly   high over the foreseeable future, until we can  get the inventory back in line due to covid. so,   ultimately if you have any questions please feel  free to click the link below and reach out to us   detail about how certain investments help   hedge against inflation, versus ultimately just 

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Investment Planning: Inflation By Tranel Services