Economists and market watchers have been warning investors about the prospect of increased inflation since the housing bubble burst in 2007. But the inflation rate keeps going lower, not higher.
As of April 30, 2013, the Consumer Price Index (CPI) stood at a paltry 1.1%, under the Federal Reserve's target of 2% annually.1 Why is this troubling? For a number of reasons:
And it's not just the United States that is dealing with lower inflation -- or even deflation -- rates. Many of the world's top industrialized nations are in the same boat.
Inflation Rates Around the World (as of April 30, 2013)2
For investors, whether inflation continues to remain low or starts to rise, a well-rounded portfolio may be your best weapon. The key is to consider your time frame, your anticipated income needs, and how much volatility you are willing to accept, and then construct a portfolio with the mix of investments with which you are comfortable.
Remember, diversification does not ensure a profit or protect against a loss. Consult your financial professional to discuss your specific needs and options.
1Source: U.S. Bureau of Labor Statistics, May 2013.
2Sources: TradingEconomics.com, May 2013; U.S. Bureau of Labor Statistics, May 2013.
3Source: Bankrate.com, May 15, 2013.
4Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price.
5Investing in stocks involves risk, including loss of principal.
6Sources: Standard & Poor's; U.S. Bureau of Labor Statistics. The S&P 500 is an unmanaged index. It is not possible to invest directly in an index. Past performance is no guarantee of future results.
7Foreign investing involves certain risks, including currency fluctuations and controls, restrictions on foreign investments, less governmental supervision and regulation, less liquidity, and the potential for market volatility and political instability.
8Source: Morgan Stanley. The MSCI EAFE and MSCI EM are unmanaged indexes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.
© 2013 S&P Capital IQ Financial Communications. All rights reserved.
Inflation Rates Keep Falling: How Long Can It Last?
July 10, 2013