Dear Clients and Friends,
I am considering starting an investment forum about inflation.
I am concerned because I do not believe inflation is going away soon. History tells us inflation is a long wave cycle that will take many years to be controlled. My sense is most people believe it is simply another challenge facing us that will not be impacting our long-term lives and our investments. Nothing could be further from the truth.
Inflation, measured by the Consumer Price Index [CPI], rose 8.5% over the past year as reported by the Department of Labor April 12. It was the highest one-year advance in more than four decades.
Fixed income investments are the most vulnerable to inflation. Since December 3, 2021, the market value of long-term US Treasury bonds have fallen an average of 23%.
It is important to measure the value of a fixed income investment in terms of its real yield. Real yield is adjusted for inflation or after inflation. Nominal yield is the stated interest rate before inflation.
Consider the following adjusted for inflation returns for fixed income investments purchased one year ago in March 2021.
Nominal yieldReal yieldOne year CD0.75%-7.75%
Worse still is the purchasing power for each $100 dollars invested at 0.75% was now worth only $91.50 a year later. Then factor in the decline in market values. Longer maturities declined the most, but all declined in value.
Our outlook remains the same for fixed income securities. We believe we have entered a long cycle for inflation that will erode both the market values and the purchasing power for fixed income securities. Our strategy is to invest in short term fixed income to minimize market losses.
We continue to look more favorably on equities.
Sincerely,
At Curran we value service over sales and believe quality service yields happy clients. Below is our 4-step process (the first three steps at no cost to you).
A short introductory call for us to get to know one other. During this call we will discuss your financial goals, concerns and hopes for the future.
In this meeting we will go over your current financial situation, take a deeper look at your goals, discuss your risk tolerances, and collect the data necessary to build a formal proposal.
Based on our data gathering session, our Private Wealth Managers will present you with a custom proposal tailored to your needs. We encourage individuals to take the time to evaluate this proposal.
If you are comfortable with the proposal and choose to invest with Curran, our team will be there every step of the way assisting in opening the recommended accounts and facilitating all necessary parts of your onboarding process.
