Inflationary Pressures and the Patience of a Man named Job Until 2023Submitted by RetireWiseCFP on October 10th, 2022
There was once a man named Job who was afflicted with misery for a long, long time for something that had NOTHING to do with him. He was caught in a battle between the forces of good and evil in the world. Likewise, the American economy, the global economy, every single investment portfolio, including cash, have ALL BEEN negatively impacted for nothing that we investors did wrong. Cash Inflation has ranged from 8.3% to 9.1% so far in 2022. That means we are losing the REAL value of money sitting in a bank account, although when we open our bank statements it does not feel like that at first.
Where are we now?
I need to get straight to the unwelcome fact: we are going to keep getting hit by inflationary stressors until 2023.
Where do we go from here?
IF the Federal Reserve Bank had accurately forecast inflation when we began 2022, a lot of investment professionals, including me, would have hedged our bets to the new reality that was about to explode. Inflation has become a negative vortex for many of the high growth rate companies we’ve successfully invested in over the years.
On fixed income and alternatives:
During 30 years of successful investing, I have followed the rule of NEVER betting against the Federal Reserve Bank. Henceforth, I will recalibrate my Fed rule: Under inflationary pressure, I will MODIFY our way of investing by avoiding or minimizing high growth stocks. For 50 years the Fed had gotten the tacking directions for financial crises, terrorism, and the recessions and expansions of business cycles right—but its experience with inflation was lacking and ALL the world suffered. The bank got the persistence of inflation catastrophically wrong. Fool me once, shame on you. Fool me twice, shame on me.
The world of Bitcoin and crypto funds had the ultimate Buyers Beware lesson today: Kim Kardashian (yes, the Kim Kardashian) was forced to pay the SEC $1.3M for improperly advising people to invest in crypto.
For 30 years, through thick and thin, I have had an exceedingly successful and durable investing strategy for my clients because I fundamentally made sure to NEVER BET against the Federal Reserve Bank. This strategy has served my clients well until—for the first time ever in 2022—it failed because the Federal Reserve Bank does NOT have solutions to right the economy during inflation except to intentionally crash the stock market, the housing market, and next, the hot job market. However, with similar patience and positive outcome of Job, we have a way forward. With a revised investment rule and clear knowledge of the way to proceed, I know how to help my clients successfully navigate from this now and into the future.
Femi T. Shote, MSF, ChFC, CFP®
Accredited Investment Fiduciary®